Blackstone to pay less than 1% of IPO to lawyers and accountants

The Blackstone Group is paying the lawyers and accountants working on its IPO under 1 percent of the total funds raised. The US buyout firm is also paying bankers slightly over half the usual aggregate fee they would usually receive on such a deal.

The Blackstone Group expects to pay $22 million in accountancy fees and $15 million to lawyers for its $4.8 billion IPO listing, according to filings with the US regulator Securities and Exchange Commission.

This means the accountants receive 0.46 percent and the lawyers receive 0.31 percent of the total funds raised.

The bankers on the deal are working at slightly over half the average rate for IPOs generally. They will receive a 3.6 percent commission on the deal or $170 million, compared to the 6.2 percent average rate bankers receive on such deals, according to US news agency Bloomberg.

Bankers have apparently taken the cut, Bloomberg was told, to benefit from lucrative arranging and financing takeover fees when Blackstone invests its latest $19.6 billion buyout fund.

According to UK newspaper Financial Times the float has been about seven times subscribed. Blackstone has also provided an additional 20 million shares to the underwriters, which include Citigroup and Morgan Stanley, to meet excess demand. 

The strong interest is despite legislation introduced to the US Senate Finance Committee by chairman Max Baucus and ranking member Chuck Grassley proposing an amendment to the Internal Revenue Code of 1986, which was created to crack down on publicly traded partnerships that avoided corporate taxes.

The bill would prevent investment advisors from claiming an exception to the 1986 amendment, as Blackstone has done for its upcoming IPO.

According to the bill, because Blackstone has already registered with the SEC to go public, the proposed rule would not apply to the firm until 2012. But Grassley told media sources yesterday he was “open” to amending the draft bill to reduce the waiver stopping Blackstone and fellow listed buyout firm Fortress Investment Group from opting out for five years.

Even when it was clear Fortress would evade the tax measures this time, it suffered a share price drop of 7 percent last week, in one day, as shareholders reacted to the proposed amendment.

After the dip Fortress’ share price has stabilised, and its share price was up to $26.50 only down 2.82 percent on last month and up 3.96 percent on last week.