It’s all in the fine print
The 337 page “Circular” detailing the “combination” of International Power plc with GDF Suez Energy International, which is to become effective early 2011, has just thudded through my letter box. It explains the “compelling industrial logic” and the excellent geographical and operational “fit” of the merger. It will give “Enlarged International Power” a robust capital structure and access to the committed financial support of GDF Suez.
Success is never guaranteed in this world of course, so the circular goes on to point out various risk factors involved. The group’s single suppliers and customers could fail to perform their obligations as could various third parties. Commodity prices could fluctuate. The world economic crisis could continue longer than anticipated. Market prices can be volatile. Some of the generating plant operate on long-term fixed price deals that may not be renewed and some are a little old. Disruptions may occur. Equally, there is no fixed guarantee that all will be for the absolute best in the best of all possible worlds. There could be political, economic and other risks out there, including the return of bubonic plague.
In short, the merger may or may not be a good thing for shareholders, but it was not all this that caught my eye. It was the stuff on the cover. For this merger is being handled by no less than three merchant banks; Nomura International, J.P. Morgan Cazenove and Morgan Stanley & Co Ltd. So let us begin with Nomura International. This is what it says:
“Nomura International plc, which is authorised and regulated in the UK by the FSA, is acting as financial adviser and joint sponsor and corporate broker to International Power and no one else in connection with the production of this Circular and Transaction. Nomura International plc accepts no responsibility to any person for providing the protections afforded to clients of Nomura International plc, nor for providing advice in relation to the Transaction or any matters referred to herein. (Our italics)
The document goes on: “J.P. Morgan Cazenove, which is authorised and regulated in the UK by the FSA, is acting as financial adviser, joint sponsor to International…and will not be responsible to anyone…for providing advice in relation to the transaction…” (Our italics)
Meanwhile, “Morgan Stanley & Co is acting as financial adviser and joint sponsor…in connection with this Circular and Transaction…and will not be responsible to anyone other than International Power for providing protections afforded…nor for providing advice in relation to the Transaction, or any matter or arrangements referred to herein.” (Our italics)
Well that seems pretty much tied down legally. Apparently Nomura accept no liability whatsoever for the document that they helped prepare. Ditto the rest of them. But wait, there is more: “Save for the responsibilities and liabilities, if any, of Normura…J.P.Morgan…Morgan Stanley…or regulatory regime established thereunder…assume no responsibility whatsoever and make no representation or warranty, express or implied, in relation to the contents of this Circular, including its accuracy, completeness or verification or for any other statement made or purported to be made by International Power, or on International Power’s behalf, or by Nomura…J.P.Morgan…Morgan Stanley’s …behalf and nothing contained in this Circular is, or shall be, relied upon as a promise or representation in this respect, whether as to the past or the future in connection with National Power…(Our italics).
But if that isn’t clear, the merchant banks involved “accordingly disclaim to the fullest extent of the law all and any responsibility and liability whether arising in tort, contract or otherwise which they might otherwise be found to have in respect of this Circular or any other such statement.”
Phew! Their lawyers have done a good job! Even the good Lord himself would have a job suing them after that little lot. They don’t even say that the merger is a good idea. Indeed, as far as the banks are concerned the entire document could be a load of horse manure, or not as the case may be. So what precisely is it that these people are doing to be paid the no doubt enormous fees the shareholders of International Power have no doubt coughed up for them?