Break fee locks in Coles and Wesfarmers

With the Wesfarmers bid for Coles being about the only sizeable M&A deal in the country at the moment, it was hardly surprising that anxious investment bankers and lawyers should be keen to lock in their fees.

The two companies yesterday announced that a slightly revised bid had been approved unanimously by the Coles board, and the two parties had agreed to up the "break fee" to $150 million from $30 million. This is equal to around 0.9 per cent of the current market capitalisation of Coles.

As one person close to the negotiations agreed, that might just about correspond to the fee take owing to the various advisors in what has been a protracted 12-month battle for control.

Top of the queue on Coles side is the Deutsche Bank team being led by Michael Roche - with the help of former investment bank chief Hamish Douglass - and John Wylie, the head of what is now know as Lazard Carnegie Wylie. Lawyers are Freehills.

On the Wesfarmers side, which would receive the break fee in the case of the deal not going ahead, Macquarie has a sizeable team led by Robin Bishop, while Gresham Partners - half owned by Wesfarmers itself - has a team led by David Feetham. Its legal advisors are Allens.

One curiosity of the revised offer is the creation of a new security, the price-protected Wesfarmers share. Investors are intrigued as to how this will work in practice, as will the ASX, which has yet to give the new instrument its formal approval.