UPDATE 2-JPMorgan loses banking fee dispute in Australia

* Court dismisses JPMorgan claim for A$50.8 mln in fees

* Case relates to 2008 takeover defence of Consolidated Min

* Consolidated only owed A$19.25 million to JPM, court says

* JPMorgan says believes “strong grounds” for appeal
(Adds JPMorgan response)

By Narayanan Somasundaram

SYDNEY, March 18 (BestGrowthStock) – JPMorgan (JPM.N: ) lost a court
dispute over fees relating to a client’s $1.2 billion
Australian takeover defence, in an unusual case that sheds
light on the often opaque world of investment banking fees.

An Australian court dismissed the U.S. bank’s claim for
A$50.8 million in fees from Consolidated Minerals which was
taken over by Ukrainian billionaire Gennadiy Bogolyubov’s
Palmary Enterprises in 2008.

The takeover, a three-way battle between Palmary,
commodities investment firm Pallinghurst and iron ore miner
Territory Resources, drove up Consolidated’s market value by
A$840 million ($775.6 million).

The case was closely followed by the investment banking
industry, which keeps details of fees close to its chest and
usually resolves such disputes privately.

JPMorgan, which advised Consolidated, was paid A$20 million
but it claimed the higher amount for retainer services, base
defence fees, incentive fees and expenses for its advisory role
in 2006 and 2007.

Justice David Hammerschlag, in a ruling on Thursday, said
Consolidated only owed A$19.25 million to the U.S. bank, but
said the two sides might want to work out the final price based
on his judgment.
For full court judgement see:

JPMorgan said it might appeal the decision.

“We believe there are strong grounds for appeal and we are
currently assessing our response in that regard,” the bank said
in a statement.

Under the agreement with Consolidated Minerals, JPMorgan
was entitled to an incentive fee equivalent to 3 percent of any
increase in offer price, up to 25 percent of the initial offer
and 5 percent of any increase in the offer price above that.

The judge backed Consolidated’s view that its fee payment
should be based on the difference between Palmary’s first and
final takeover offer.

JPMorgan’s view was that the incentive fee should be based
on the difference between the first takeover offer from
Pallinghurst and the final offer from Palmary.

The judge said JPMorgan did not deserve any incentive fees
for defending the company against two other competing offers
which had helped to drive up the company’s share price.

“There was no need for either of them to be repelled or
warded off,” Hammerschlag said, referring to the two losing

The judgment said JPMorgan was entitled to a base defence
fee of A$9.56 million, an incentive fee of A$9.53 million and
other minor fees, compared to its claims of a base defence fee
of A$10.25 million and incentive fee of A$35.79 million.

“This is a great decision,” said Consolidated Minerals. “We
can now concentrate on creating value and longevity at the
Woodie Woodie manganese mine.”

Stock Market Analysis
($1=1.083 Australian Dollar)
(Editing by Balazs Koranyi and Muralikumar Anantharaman)

UPDATE 2-JPMorgan loses banking fee dispute in Australia