Inside the Biggest M&A Deals You Need to Know This Week (UniCredit, GameStop, eBay, Eli Lilly)

Welcome back to the Market Maker podcast, and we're going back to one of our most popular formats, and that is the biggest M&A stories you need to know about this week. And this time it's hostile, folks. And so what have we got in the content mix for you this time? We've got 3 incredible stories packed full of insight and intrigue, lots of learning. And as I said, fair bit of bare-knuckle boardroom combat here. So first up we've got UniCredit and Commerzbank. The quote, I'm going to put this on the responsibility of my notes. The Shark, not my personal opinion. I can't say I've ever met Andrea Orsell, the CEO of UniCredit, but he does go by the nickname The Shark, and he's gone hostile to tie up in a European banking mega merger. We have Briefly talked about this in an episode a few months ago. It's just reignited this, this last few days. The second story of the week is Ryan Cohen's GameStop launching an unsolicited $55 billion bid to acquire, yes folks, it still exists, eBay. And we'll discuss all things meme stock, reverse takeovers, and of course you might have seen it, Steven was just giving me his latest interpretation pre-recording. Of that CNBC interview, which I'm sure some of the GameStop fans would've seen. And then finally, we're gonna take a look at a trillion-dollar company you might not never have heard of. Eli Lilly, the company behind the wildly successful weight loss drug Mounjaro, is issuing $8 billion of bonds for a diversification acquisition spree. So that's what's on the docket. However, before we begin, We might have done a shout out a few times to a special guy, Saarp, who's been our phenomenal researcher for, well, about a year, I think. However, he has got unsecured an investment banking job, so very well done for Saarp. And that means that we are now looking for a new researcher. We, the commitments we have are very much kind of open-ended in the sense that we have this one regular feature every week. But we would love to really give the opportunity to someone out there, like with Saarp. He just did this pro bono so he could learn, so we could give him our platform to raise his own profile. And thankfully, through his own means and with us, he's landed the job that he aspired to be in. So hopefully we can give that opportunity to someone else. So if you're interested in becoming our new researcher for the show, specifically on the M&A segment, then all you need to do, find me on LinkedIn, drop me a DM, and why don't you pitch me a stock research one? You don't have to do 3 like we are doing here, just one. And then Steven and I can hopefully give that opportunity to someone out there going forward. All right, let's get into it then, Steven. This latest development then, a European banking mega merger. What's the latest?

Yeah, thank you, Ant. So yeah, so this is UniCredit and Commerzbank. I remember speaking about this a year ago, and it is a story that has rumbled on, I think since September 2024, when UniCredit started building up a stake in the German Mittelbank. Commerzbank, bank that services that kind of middle industry part of the German heartlands. But everything has accelerated relatively quickly to the point that last Tuesday, UniCredit offered— this is hostile, so we'll talk about that in a second— €35 billion to Commerzbank shareholders, not to the board. To their shareholders. And just give me, I'll just give you a little bit of a breakdown of the deal. So they are offering 0.485 shares of UniCredit for every share of Commerzbank. So it's an all-share transaction valuing each share of Commerzbank at €32, which is actually over 10% below the current market price of €37 per share for Commerzbank. So often when we talk about M&A, We talk about premiums, right? Control premiums, the premiums associated with bringing a company from the public market and into the hands of a corporation or a financial sponsor. But this is actually a discount to the share price as is at the moment. You might be thinking that's a little bit, little bit of a weird way to launch a hostile bid. Bearing in mind a hostile bid, you need the approval of the shareholders. And the shares are currently worth €37 a share. However, if you look at the history of Commerzbank's share price performance, they have never traded, the bank has never traded above €22 a share before this takeover rumor mill started gaining a little bit of momentum. So often what happens in an M&A transaction, in a public M&A transaction, is that the rumor mill starts ticking, interest starts gathering from a potential acquirer, and then the share price goes up in expectation of, you know, people piling in to get that sale at that high share price. So yes, €32 is low relative to the share price at the moment, but it's over 10 years, €10 higher than the highest that Commerzbank has ever reached before. A little bit of mechanics. The shareholders have 6 weeks to decide. The deadline is the 16th of June. And the CEO of UniCredit, Andrea Orsell, says the deal can be sweetened a little if there is strong investor demand. So this is an absolute doozy of a transaction, and there's so many different places that we can go here. Where do you want to take it?

Why would he say the sweetener straight off the bat? So, so they are, he already knows that this is a lowball offer, but this is the first negotiated price. So, or is it other elements to sweeten outside of the actual transactional price, if you see what I mean?

Yeah, it's a really interesting one. I wonder whether, I wonder whether there needs to be a minimum viable investor demand or agreement that this is a decent offer on the table in order to have that little sweetener that tips it over that percentage of shareholders in order to acquire the company. But it's a little bit of a weird one. You know, you would hope to put most of your cards on the table with that offer. There's some really interesting stuff here. You know, so Orsell is playing the dark arts. So he has launched a, or UniCredit has launched a marketing campaign in Germany, basically saying that Commerzbank is being badly managed. It's being, it's unsafe. It's got, it's been neglected. You know, it's short-termist and it deserves to be sold to an Italian bank.

I suppose that there's even though it seems incredibly underhand, but there's no rules stopping you from doing that, right? Other than surely is, it's kind of like if I was in Britain and even though it's got international shareholder representation, but if someone was saying that about BP, for example, doesn't that inspire the politicians then to step in? And isn't this actually, I suppose you've got the shareholders who might have different incentives to then the government and its own incentives. So how does the government then start to come into the fray here? Because it seems like it's one of those nationalistic kind of brands that you'd associate with Germany.

Yeah, absolutely. There's a funny thing about banks that engender a certain national pride or national protectiveness. And again, it may be, it may be worth thinking about what are those industries that are necessary to keep within the country for that country's viability going forward. So again, you think about farming, you think about agriculture, you think about energy, you think about certain, you know, these kind of basic things that you really want to have some level of control over. So that if the stuff hits the fan, you know, we still have food on the table and banking's a little bit like that. So the national bank champions, they're so protected by the government. A, because they have such influence on the way that we go about our daily lives. They have such a strong relationship with the Bundesbank or the Bank of England here in the UK. And therefore such a strong relationship with the government. So it's this weird, this is a really interesting case study or test case for ever greater integration into the EU. So what is more important? Is it Germany having really, really strong domestic banks that are owned by, that are owned by Germans that are on German stock markets? Or is it indeed more important that the EU has a really, really strong set of banks that can compete with the likes of JP Morgan and Morgan Stanley and Bank of America that quite frankly are much bigger, much more capitalized, and are taking quite a lot of business away from these, you know, these subscale banks. So who's going to win, Germany or the EU?

Yeah, I hear your EU unity argument in times of somewhat tranquil harmony in the geopolitical context. I find that when the shit hits the fan, that's when you start to see then a little bit more isolationist kind of mentality and a little bit of self-dependency and that whole euro-integrated kind of model starts to fall a little bit. I don't know. I feel like, I feel like that could get tested through depending on the economic political climate quite a lot. And when ultimately, I guess what I'm saying is when push comes to shove, I think an individual country will look out for its own self-interest ahead of then the Euro's greater good. But I guess if one common denominator being the US, politically, or in this case, she's just saying they're just such mega banking giants. How can you compete? But then, well, like, why does, why does, why has there always been a relationship with UniCredit kind of sneaking into Commerzbank? Because this was always going to be a thing, right? At some point. Why has, if the government was so worried about it, why hasn't Deutsche Bank and Commerzbank come together to form a German banking giant?

Well, that's, that's not necessarily a ridiculous thing to say. We'll talk in a second about the concept of a white knight. Which is a concept that exists in the concept, in the context of a hostile takeover. But the way that UniCredit's gone about this creeping move to hostile, this hostile bid, is it's built up its stake in Commerzbank little by little, but often through the purchase of derivatives, which don't appear on the share register. But effectively give you ownership by proxy or indirectly. And they've just crept up 5%, 10%, 15%, 20%. They got to the stage that with their derivatives position, they own over 30% of Commerzbank, which puts them in a position that they have to table a bid. Now that's really interesting because the second biggest shareholder in Commerzbank is The German government through the state bank KfW. Now KfW owns 12% of Commerzbank. So the question is, does KfW, the state-run bank that owns 12%, do they come in at the behest of the German government, at the behest of the German patriotic fervour that Commerzbank might instil? Did they come in and become what we call in the industry the white knight. So let's not get too Batman on this, but let's consider Unicredit is the dark knight, right? So they've come in with a hostile takeover. They've gone beyond the board. The board have not recommended this. They don't want this to happen. They've gone straight to shareholders. They're launching this quite aggressive campaign to say that Commerzbank is in bad hands and is in bad shape. So we're going to go straight to source and try and bring the shareholders on side. What KfW, backed by the German government, can do is go, well, actually, we're going to table an offer that you might find much more appealing and come in as the white knight and table an offer that works for the shareholders. And works for the kind of the mood music and the politics.

I feel like it's too easy or naive just to focus on an improved bid, then let's say from the Dark Knight. The problem is about the Dark Knight. He's a little crazy as per the film and the man we're talking about. So how does that then land? Like, let's say shareholders, they're like, right, yeah, I'll take some profit on this trade from €22 up to this this mark that we've got to on this merger anticipation. But then how does that integration and company look like after someone like him? And he's not a spring chicken either, as far as I'm aware. So how does he play into it? We called him at the top of the show, the Shark. So why does he have that name?

Yeah, this is, so this is Andre Orsell, and anyone that knows their finance history will have heard this name. So Orsell is, again, he's worth tracking because he's one of maybe slightly out of the old school, but he is a wonderful representation of maybe the reason why a consummate or compulsive dealmaker doesn't necessarily make the best patrician CEO of a major bank. So Orsell grew up rose through the ranks in M&A, in investment bank, and was known for over a decade as being basically the number one bank, what we call FIG, financial institutions, M&A banker in Europe. And he was responsible for, I think his first big breakthrough was the 1998 Credito Italiano and UniCredito merger, €21 billion. But the one that we might all know about is the carving up of the Dutch bank ABN Amro in 2007, giving a bit to RBS, giving a bit to FortisBank, giving a bit to Santander. Santander did pretty well out of it. The other two, the other two, not so much, right? So it's the downfall of both of those institutions and, you know, a precursor to the financial crisis. So he loves deals, but is he a reliable steward of a storied bank? Maybe not so much. And he's called the Shark because his, you know, I was reading some profiles from the Financial Times, yeah, back a few years ago. He said he often gets up at 5:00 AM and starts calling his junior employees and does not let up until after midnight. And then I like, wait, in 2013, when a Bank of America intern died after it was said that he had worked for 72 hours straight, Orsell rebuked pressure to change the working hours of junior bankers. So he is, he is like as investment bank as investment bank goes, and he was brought into UniCredit, I think to do deals and he hasn't done one yet. So this is like a, I would say like a dog with a bone, like a shark, like a shark with a bone. Like he will not stop until he has done a deal because he is a compulsive dealmaker. Even if that doesn't make kind of long-term sense for the bank, obviously he believes it does. But is he a good, you know, stable CEO that's got great relations with investors and manages well and, you know, does all of that good stuff? No. He just wants to do deals.

Yeah, it's gonna be super, super interesting. I wonder, this feels a little bit like almost like a bad trade that you've committed to now and you just can't get out of it. He's, he's into that, uh, that scenario, uh, at the moment. But yeah, it's super interesting. I guess what, 6 weeks you said for the deal to play out in its first response. Would you expect then that to tick over or would we get interim signs, signals coming back as a response to this hostile approach? Oh, you just lost your audio.

Yeah, there'll be lots of rumblings, lots of news coming out in the interim period, and there might be an extension for the shareholders after that 16th of June. I think there's a lot of twists and turns still to go between then, between now and then, and we'll definitely keep abreast of the story.

You know what I'm going to do? I'm going to go onto one of those airline trackers and try and track his aircraft's movements of Orsell, see where he's going as a precursor signal for when deal flow information might hit the tape. Just a little FYI. Alright, well look, let's move on and talk about someone we've, I guess we haven't spoken about in a while, but has come flying back into the news in the past week, and that is GameStop, but also eBay. And when I heard that GameStop was to offer eBay $55.5 billion, like most people, I thought, how does that work? That's a lot of money for someone like GameStop. So yeah, perhaps we could start with some of the price tag and mechanics behind how they got to that figure.

Yeah, this is an absolute classic. I can't wait to see whether this fizzles out and dies or actually gains a little bit of momentum. But this is GameStop. I don't think I've ever spoken about, maybe I've spoken about it once on the podcast a couple of years ago, but certainly if we were doing this podcast back in 2021, you guys would've been all over it. GameStop is the original meme stock with its share price rising thousands of percent backed by the Reddit army and the meme stock crew, and we'll talk about that in a minute. But this offer, so GameStop, it's recovered quite nicely. It was a bit of a, well, it was a failing company and that's why it got picked up, but it's doing quite nicely. Its market cap is up at $11 billion. It's moved from losing upwards of a billion dollars a year back in 2019 to being profitable, you know, makes a few hundred million a year. It's doing okay. There's been a turnaround strategy. So it's stable. Market cap's $11 billion, 30 times price earnings, and it's gone out and tabled this, well, this reverse takeover offer to buy eBay, which we've obviously all heard of, for $55.5 billion. That is 5 times the size of GameStop. So how does this work? So it's a $125 a share offer to the shareholders of eBay, which represents a 20% premium to its pre-deal announcement share price. The composition is going to be 50% in cash, 50% stock. So each eBay shareholder will get 50% of that $125 in cash and 50% will convert into GameStop stock. So the question is, is this even possible? Now, you know, we've gotta figure out, is the funding in place? So let's break down this $55 billion. So GameStop have, as of the last time I checked, about $9 billion of cash on its balance sheet. They have a $20 billion high confidence bank commitment from TD Securities. So this is not locked and loaded, but it's a letter of confidence from TD, the bank, saying, look, if you do this deal, we think that we can get $20 billion in various different forms of debt in order to make up that 50% cash part. And then the rest, you know, so that's $29 billion. The rest is going to be financed with the issuance of GameStop stock. Now there's a couple of issues here. Firstly, issuing stock is dilutive to the GameStop shareholders, so not always great. Bearing in mind that they'll have to issue stock to the value of $27.5 billion and the share price is $11 billion, the market cap's $11 billion. But secondly, if I'm a shareholder of eBay, I might like that $125 a share price tag, 20% premium. But do I like the fact that I'm only going to get $62.5 of cash? And then the other 62.5% is going to be converted into the stock of a company that is known as being the most volatile meme stock that has ever existed. The original meme stock, you know, do I want to go from possibly quite boring, relatively stable, maybe slightly declining eBay to the wild ride that probably will be GameStop?

So I've got two questions for you. One is YTD Securities. It just struck me as, is it because of the nature of GameStop and you have to go to some other places? Like, why not just go to JP Morgan for these types of big ticket backings? Because they've got the tentacles to raise funding. That's one. And then two, like, what's eBay got? Like, why buy eBay?

Yeah, it's a really interesting one. I think TD Securities, obviously it is a big organization, it is a big bank. It's not one that we tend to talk about a lot. I know that Cohen, Ryan Cohen has had successful dealings with TD Securities before in the Chewy era. So Ryan Cohen founded and then IPO'd the pet food provider Chewy in, I think he IPO'd in 2018, 2019. That's where he made his money and made his name. So he definitely had a relationship with TD from then. I would also expect reading between the lines that Ryan Cohen has a disdain, maybe it's too strong a word, but he probably doesn't want to deal with the big beasts. You know, he is iconoclastic to the nth degree. He doesn't want to be you know, a, he doesn't want to be in cahoots with a stooge to the likes of Goldman Sachs. I think that would go against Brand Cohen and his millions of loyal followers.

And then with eBay, like I just think of eBay as quite a dinosaur these days. Just refresh my memory again. Like what's eBay got that he needs then? What's the rationale and the plan?

Yeah. So Ryan Cohen's repeatedly gone on the record, by the way, he's built up a 5% stake in eBay. So he's putting his money where his mouth is. But he basically said, look, this is a good, this is a really, really good business that's been managed into the ground. It's spending $2.5 billion a year on marketing and sales are not going up at all. There's so much fat to be trimmed. And also, you know, we have, we being GameStop, we have 1,600 stores across the country. Now, what if those stores almost became mini fulfillment centers for eBay? So, you know, that's kind of what GameStop does with its secondhand games. They verify, they check, they make sure that everything is legit in order to be able to resell it. So maybe there is a little bit of kind of product synergy between the physical nature of GameStop and the brand and the volume that passes through eBay. He has mentioned that he wants to make it a competitor to Amazon. I think that's probably a bit of a stretch, but I can kind of see where he's coming from. It's definitely a, yeah, as you said, a bit of a dinosaur that everyone's heard of. And needs a little bit of love. So I don't necessarily think it's a terrible idea. It's just the structure is so interesting.

And this story then came to life because predominantly a CNBC interview. So it wasn't just a headline that hit, there was an interview shortly after with Mr. Cohen. So what was the context and what was the outcome in terms of, I guess there's institutional interest when someone like that speaks. And there's also very much so unique case here where he's speaking to the meme army, if you like. So how, what was that interview? How did that go down?

Yeah, so this was a 16-minute Squawk Box interview between Andrew Ross Sorkin, who's a very highly respected CNBC finance commentator. And Ryan Cohen. Now, this was one of the greatest bits of finance entertainment I think I've ever experienced. I had to watch it twice. It was so good, and I had to go through all of the comments underneath the video just to kind of make sure that I got my head around what I had just seen. So here's Andrew Ross Sorkin in his blue suit and his blue tie. With a CNBC professional background behind him, he dials in Ryan Cohen, who's wearing a leather jacket and has got a blurred background. And bearing in mind, Ryan Cohen is famous for saying, look, I don't really live anywhere. I just travel from store to store. I don't take a pay. I don't take any pay. I only get rewarded if the stock goes up. So he's very much this, again, this iconoclast. The background is that CNBC, as you know, part of the institution of finance, were calling for GameStop's demise, saying it was an absolute basket case of a company in 2019 and 2020 and 2021. And then when the meme stock thing hit and the share price started going up in spectacular fashion and totally undermining the principles of finance, According to the script that is CNBC. Obviously CNBC continued to say that this is a total joke. This company's worth nothing. It's just a meme. So Ryan Cohen comes on with a bit of an axe to grind and responds in such a supercilious, uh, disdainful manner towards the financial commentariat. That is Andrew Ross Sorkin and his contemporaries. And basically says, look, check the website. Whenever there was a question, check the website. Or, I don't understand your question. You know, Anthony Ross Sorkin kept going, so how are you going to fund this deal? How are you going to finance this deal? Ryan Cohen responds, just, you know, check the website. It's, it's, it's half cash. It's half stock. What, like, what, what, what more do you need to know? It was this extremely awkward just bizarre interview. And again, there was a couple of moments where Ryan Cohen was just like, look, didn't you guys call for GameStop's demise a number of times? And look at our financial performance. It's doing okay. Didn't you doubt us? Didn't the whole financial community doubt us? We're doing all right. Now, one, we'll put it in the show notes. Definitely worth watching this. The army, the acolytes of Ryan Cohen absolutely flipping love this, right? This is absolutely his playbook and they will follow him to the grave, right? And he's done a great job with GameStop. No, no denying it. But who does he need to convince to get this deal over the line? The shareholders of eBay and the board of eBay. And the shareholders and the board of eBay are not that into kind of messianic meme stock figures. They're doer. Institutions, institutional investors, asset managers, people in suits that probably need to know that this is a credible deal that's got the right funding in place. And this isn't just a bit of a laugh. So in reaction to that interview, although the meme stock people loved it, share price of GameStop went down, share price of eBay went down because they were like, well, this transaction's probably not going to happen. Maybe this is all a bit of a joke.

My mind kind of goes to, I know we haven't, I haven't done the research for this, but I wonder who leads or who's the key influencers within eBay, as in there's a company as a whole entity, but are there certain influential figures that might align a little bit with Cohen, or there's some previous historical relationship somewhere that somehow this makes sense.

There might be, there might be. But so Cohen is famous for his activist investing, right? He famously obviously built up his stake in GameStop and that was the start of it all. But he's also invested in Bed Bath Beyond, which is another failing bricks and mortar US company. There was a claim of a pump and dump there. Buy the stock, pump it up on his channels, and then sell it for a profit. So he is an activist investor and he has had some success. So whether he's got people on the inside or whether he's just coming in from the outside and throwing some rocks and seeing whether they land, I'm not entirely sure. But if anything, it's brilliant entertainment.

We'll put a poll down for the second story then and get people, we'll canvas the community's opinion and where they think this is a stroke of genius. Or a little bit crazy. All right, third and final story then is Eli Lilly, which being someone who used to cover equities, I'm aware of, but I think you're absolutely right. I don't think many people in the mainstream perhaps are maybe aware of it, but not so how big they are and all the different things that they're involved in, which actually probably a lot of us utilize on a regular, if not daily, weekly basis at least. So, Eli Lilly, maybe a little bit of framing first on who they are before we get into the fact that they're selling $9 billion of bonds to fund acquisitions and then what those acquisition strategy is.

Yeah, absolutely. I thought this was a brilliant opportunity to discuss Eli Lilly and then maybe talk about its— talk about the mechanics of a pharmaceutical company that has a breakthrough worldly of a drug and what happens afterwards. So Eli Lilly, as I said, it's probably one of the biggest companies you've never heard of. Its market cap is just creeping up to a trillion dollars. So it's one of the big beasts. Yeah, I know. It's absolutely remarkable. One of the big beasts in the US, and the reason why is because of one thing, the GLP-1 drug Mounjaro/Zebbound. Now, Munjaro, along with Novo Nordisk's Ozempic, they have been the story. You know, we've spoken a lot about AI, but this has gotta be the second story of technological and therefore profitable breakthroughs over the last few years. So in the third quarter of '20, I'm just gonna give you some Eli Lilly stats so that we can get our head around this company. Third quarter of 2025, Mounjaro became the world's best-selling drug. They sold $10.1 billion of Mounjaro in the third quarter alone, right? That is absolutely remarkable. Its sales are absolutely smashing Novo Nordisk. Novo Nordisk put out a kind of a profit and sales downward revision. Eli Lilly's done exactly the opposite. It's come out and said, no, no, no, we're going to be growing at 27% revenue next year off a base of $65 billion of revenue in 2025. So these guys are bullish in the extreme. And if you just take a little look at their numbers and a little look at their pipeline, you can kind of see why. So they made $65 billion of revenue last year, trailing 12-month revenue of $72 billion. $34 billion of earnings before interest and tax. So that is a 47% operating profit margin. Now, anyone that knows operating profit margins, you think 47%, you probably start thinking Nvidia or one of the big, you know, extraordinary SaaS tech companies, whatever it might be. But these, you know, once you get a drug that is patent protected, that doesn't cost a great deal to produce, and you can sell it for name your price, then you can get these staggering margins. The share price on the back of Mounjaro is up over 400% in the last 5 years. And quite recently, and you might have heard about this story, the FDA approved the weight loss pill called Foundeo, and that's already gaining a lot of early traction. So you've got the basis of the GLP-1s, you know, obviously quite expensive, stick a needle in, not great, but still $10 billion a quarter. Then you've got this new product launch, which is, you know, I'm just going to take a pill every day. And that is keeping this share price momentum and keeping the story and pushing this up over a trillion dollars.

And just to be clear here, making it super simple, we're talking about potentially a pill that people would take to control their weight. So this would be the absolute monster of an opportunity where primarily this was designed to what, treat diabetes. It just so happens that it's been more widely used for chronic weight management. But yeah, going from injections to pill form, just to be clear. Okay. So look, let's talk about, I guess, what are they doing then? So that's the company backdrop. What's this latest then about investment-grade bonds first, and then also putting that in the context of the macro climate? I mean, there's a lot of stuff going on at the moment, a lot of moving parts, and I guess visibility is uncertain just given what's happening in the Middle East. So how do you tie all that together?

Yeah, absolutely. So as I said, the headline that came out last week was that Eli Lilly sold $9 billion of investment-grade bonds cut across 8 different tranches to fund their acquisition strategy. To just give it a little bit of detail, because we don't talk about fixed income, we don't talk about corporate bonds a great deal on this podcast. So Eli Lilly is obviously one of the best-rated companies from a credit rating perspective in the world. At the moment. It is a AA negative on the S&P, from the S&P, which is pretty high. And it's an AA3 from Moody's. Again, two notches below or a few notches below the very, very top corporate and government issuers. So it's very, very high investment-grade issuer of debt, issuer of corporate bonds. So it's gone out and pursued this acquisition strategy that we'll talk about a little bit in a little bit. but it's used the likes of Citi, Deutsche Bank, Goldman Sachs, and Morgan Stanley to get $9 billion of corporate bonds, of bonds away in the market covering 8 different tranches. So tranche just means a slice, but 8 different parts, and the parts are different depending on their maturities. So the shortest maturity of this $9 billion across 8 tranches, the shortest maturity is 2 years. The longest maturity is 40 years. So they've issued a bond that is redeemed in 2066, and the yield is 0.8% above treasuries. And obviously the higher the yield, the riskier the company. They thought it was going to be priced at 1.13%. But actually came in at 0.8% because of the credit quality, because of the story, and increasingly because of the demand. You mentioned timing. There's this amazing staggering bifurcation between what we hear if we read BBC News or normal news channels, and then if we read and watch stock markets and look at everything going gangbusters. In terms of earnings and tracking the S&P and all this kind of stuff. So actually the market's extremely bullish. It does also help that Eli Lilly's credit rating had an upgrade last week from both Moody's and the S&P. And a couple of weeks ago it also announced that it smashed its quarterly earnings. First quarter results that beat even the highest of analyst estimates. So you talk about timing and you've now, as Eli Lilly, you've managed to get away $9 billion of bonds really, really quite cheap, right? Which is going to help.

I'm just looking at the investment bank league tables and perhaps then just a touch on that and you could perhaps add some context because I was looking at this and I saw Citi, DB, GSMS. And I was just having a look because in the FT way that they slice and dice their fees collected by product year to date. So when you put it all in the mix, there's the M&A stuff, the fees, the equity, bonds, and loans. So here's a bit of a quiz question for you. In that top 10 then, which one has the biggest representation given we're talking about bonds? Do you think? It's a European bank as a hint.

Deutsche?

It's not Deutsche. It's going to be the other one.

UBS?

BNP.

So, ah, there you go.

54% of their fees collected comes from bond issuance, which is by far the most dominant. The next biggest one I could see on the top 10 is Citi. And then yeah, if you take someone like Jefferies by comparison, it's 8, Evercore 0. Just for those who are absolutely kind of new to this kind of field then, why is BNP up at 54 with M&A advisory at 5 and then Evercore's 94 and 0?

Yeah, it's a good, it's a very good question. It's just the It's the legacy and the strategy that these organizations pursue. Evercore has been born out of advisory work. There's a big difference between advising on M&A and underwriting a bond issuance. If you think about M&A advisory, you are not in between, you are not broking between a company and an investor base like you would be if you're trying to get a bond away or if you're trying to get an equity issuance away. And obviously when you're trying to get a bond away or you're trying to get an equity issuance away, they tend to be underwritten by the banks. So the banks need to have a really strong balance sheet. And Evercore's not a bank. It's a, you know, it's a, well, it's an investment bank. It doesn't have the same infrastructure and balance sheet as a BNP that has an extremely large balance sheet and will have had a long storied history in both bank lending, but also fixed income as well. So it's the makeup, it's the, you know, it's the makeup of the organization. It's where the expertise is and it's also where the capability and balance sheet is as well.

So would this make sense then of why you see so many names often on a ticket? Is that the names are playing different roles? Because I'm assuming here they get the bond away, they've got to deploy these proceeds. And there's a strategy and execution of their M&A strategy, which Eli's not going to do themselves. So is it that you use, hypothetically, you could use BNP for some of the debt raising, and then I could use Evercore, or in this case GSIC is on the ticket as well for this Eli bond raising. So do they do part of that, but then they make the bigger fee on the the other side of it.

Yeah. And we talk a lot about, you know, when we talk about business strategy, we talk a lot about synergies, right? And trying to cross-sell revenue synergies is one of the big things that we speak of. And obviously the modus operandi of a bank like Goldman Sachs is to get in on everything, right? Same with JPMorgan. I want a piece of the equity capital markets mandate. I want a piece of the bond mandate. I also want to be on the ticket on the M&A. I want everything, right? And there'll be other organizations that just say, no, no, no, we'll stick to our lanes. We are going to be the experts. You can use BNP for the fundraise, use us because we are, we're experts in healthcare, we're experts in pharma from an M&A perspective. And then you split the ticket and that can have real value as well. So yeah, absolutely pick and choose.

So you are the pure play, you are the Evercore, let's say, and you've now got your proceeds. So what are you advising for Eli Lilly? What are they going after? What's the opportunity at hand here?

Yeah, absolutely. Well, they've actually, they bought a couple of companies in the last few months and it's interesting the timing of the bond issuance versus the announcements of the transactions. So they bought two companies, or announced the acquisition of two companies, Centessa, which is a sleep-wake disorder company. I won't go into too much detail. And Colonia, that is a cutting-edge approach to treating blood cancer. Very, very innovative companies, both in the kind of $7 to $9 billion I think it was $7.8 billion for Centessa, $7 billion for Colonia. Now these are two big acquisitions that are going to be funded almost retrospectively by this bond issuance, right? And this bond, because there is a difference, there is a significant difference between the announcement of an acquisition and its completion, as we've discussed previously. So you announce the acquisition. You know, you say, look, the funding is going to be secured, and then the acquisition might not, the money might not change hands for another 6 months, another 9 months. There's a lot of stuff that needs to happen, not least from regulatory perspective. So that can be the time that Eli Lilly goes out to the market and goes, hey, let's raise a bunch of cheap bonds. You know, we said that we could pay with it, we could have paid in cash, but we're going to raise some more debt. And that's what they're going to put this money to. And it's all part, by the way, just to wrap this piece up, it's all part of this. If I'm a pharmaceutical company, I've had an absolute smash hit. I need stuff that's coming down the pipes that is going to be a smash hit in the future. Mounjaro doesn't go off patent, which is the crucial cliff for these organizations. Doesn't go off patent until 2026, uh, 2036. But as an investor, I know it's 10 years away. I'm going to start thinking about that cliff and it's going to start getting closer and larger as we go forward. So it's always good to have another hit to come in its wake.

So how uncorrelated is the healthcare M&A fee stream as opposed to other areas, given that it's always, you've always got cliff edges? There's always a blockbuster coming to exploration. There's always a necessity for diversification, building the pipeline. Does that keep then a pretty— if you were to look at the sectors within M&A Advisory, is it almost like it's defensive in that way from a fee generation point of view?

Yeah, absolutely. It's the kind of pharmaceutical industry is in a way similar to maybe the tech or the kind of startup venture capital industry. In the sense that you get a lot of these small pharmaceutical companies born out of a research lab, born out of a very smart person that's discovered something at a university that goes, that gets funding to go through the very early clinical trials. They may not get all the way to FDA approval because that takes and costs a lot of money, but they are kind of, they're in the draft, right? They're, They could be the superstars that's going to regenerate the squad of an Eli Lilly. So they're kind of, again, we used the scouting analogy last week. It's exactly the same. They'll be scouting these organizations, scouting these universities, scouting these small companies going, all right, this could be our 18-year-old superstar that's going to win us the Champions League. But these small companies, they don't have the distribution, they don't have the balance sheet, they don't have the capability of an Eli Lilly. So you're absolutely right. This is, you know, this is absolutely the script of the pharmaceutical industry. And therefore it's a relatively regular payday for those M&A bankers. They're just like, look, you need to refresh your squad. Here's a couple of good ideas.

So there could be a little late in career pivot or transition. Where you've been this person developing lots of ideas and research, and actually you could become key chief scout for one of these banks, knowing all these labs, knowing all the workflow, technological breakthroughs being worked on. So I'm assuming that there's so much money at hand here that I naively tend to think of these teams clustered in these super towers in New York or London, but there's actually what? What is that film? You got Brad Pitt's off doing his thing, trying to find the next breakthrough. So that would exist as a job then.

Absolutely. Absolutely. And the kind of corporate, we'll probably call them the kind of corporate strategy teams or whatever you want to call them at these big organizations. They're pretty much the most important. Yeah. Anyway, I mean, Eli Lilly will produce and manufacture and discover its own drugs as well. But to have that Again, it's a little bit like the football analogy. You've got the academy, the homegrown start, the homegrown players, but you can't rely on the homegrown players because you might not get FDA approval for all of them, or they might not be a success and they might have to go off to, you know, go off to pastures new. So yeah, it's, yeah, you know, if you know your science or if you know your pharma, it's a, yeah, such an interesting place to be.

Perfect. Well, look, fascinating conversation as always, Stephen. As a reminder at the top of the show, please do let us know if you're interested in our researcher vacancy that we have, and we can use our platform to help shine a light on you as a student aspiring to work in finance. We would be more than happy to do that. Just drop me a DM. I'll put my LinkedIn as well as Stephen's in the show notes. We'll also include the current interview with CNBC. I've not watched it yet. I'm going to do so straight after this recording. So yeah, recommended by Stephen. But thanks as always, everyone, for tuning in. We'll see you next week.

Thanks, Ant.