Eyeing Alibaba IPO, bankers skip other lucrative mandates

Major financial firms skipped some $100 million in combined fees they could have made from work for clients other than Alibaba Group over the past year.

That's because the banks didn't want to irk the Chinese e-commerce giant by working for its rivals or acquisition targets, and risk losing out on business in an IPO expected to be bigger than Facebook Inc's $16 billion listing in 2012.

In a sector that's red-hot, companies are sensitive about letting advisors work on deals that run parallel to those of competitors for fear of confidential information leaking out. Another concern is that a financial advisor already supporting one IPO in the region can't give its undivided attention to a rival's deal.

An estimated $300 million in fees are up for grabs in a listing that Alibaba said on March 16 will take place in the US. Tuesday marked the first meeting of the bankers, lawyers and accountants helping the company on the deal, getting together in Hong Kong, which houses part of Alibaba's corporate finance team.

Citigroup, Credit Suisse, Deutsche Bank, Goldman Sachs, JP Morgan and Morgan Stanley are the banks working on the IPO, Reuters previously reported.

All six banks are existing lenders to Alibaba, putting them in good position to win the coveted mandates, the people familiar with the matter said. The estimated fees from Alibaba's IPO would make it the biggest Chinese fee payer to global investment banks in a decade.

"Because Alibaba is a very big transaction, people are very keen, the process is so competitive," said Ronald Wan, chief China advisor at financial services firm Asian Capital Holdings.

A recent unsolicited bid by Alibaba to buy out a Chinese Internet company exposed the battle lines. Alibaba, which already owns 28 percent of digital mapping company AutoNavi Holdings Ltd, last month offered to buy the rest of the company in a deal valuing the target at $1.6 billion.

When AutoNavi tapped advisors to organize its defense, some investment banks passed on the business to avoid potential conflicts with the IPO, people familiar with the matter said. In the end, AutoNavi's independent committee hired Lazard Ltd as its financial advisor. AutoNavi declined to comment.

Banks usually pounce on defense mandates like this. These are lucrative roles for mergers and acquisitions departments which can command a fee of nearly 2 percent of the total deal.

In February 2012, well before Alibaba launched its IPO process, at least five banks, including Goldman Sachs and Morgan Stanley, were in the running for mandates to underwrite an IPO by jd.com. When the Alibaba competitor filed for a $1.5 billion US IPO last month, only two underwriters were in: Bank of America and UBS.