Deals of the year: North America
Best equity deal
Type of deal: Follow-on equity offering
Deal size: $621 million ($680 million with greenshoe)
Date: May 2003
Underwriter: Lehman Brothers
Rival bankers were astounded at the terms Lehman Brothers offered to win the mandate for Dominion Resources' follow-on equity deal. "It sounded crazy at the time," says one banker. "They were charging less than $900,000 to take on $620 million of risk. We were scratching our heads trying to work out what angle they had. We even wondered whether they'd simply made a typo in the e-mail."
They are fair questions to ask of equity deals such as Dominion's. The company rang up the equity capital markets desks of the major banks and investment banks they deal with at just after 4pm on May 20, telling them to be on a conference call at 4.15pm to hear the terms of the deal. Each team then had until 5pm to discuss, decide and submit its bid, in writing as well as over the phone.
At least 10 banks were involved, which meant bidding would be aggressive. There had not been a great deal of equity capital markets activity so far in the year, and every investment bank had its own reasons, beyond satisfying the customer, for winning the mandate.