Greenhill’s Third-Quarter Profit Plunges as Investment Falls
Greenhill & Co., the advisory firm that has declined 57 percent in New York trading this year, reported a 41 percent plunge in third-quarter profit as the company recorded a loss on an investment.
Net income fell to $8.56 million, or 28 cents a share, from $14.5 million, or 47 cents, a year earlier, the New York-based firm said today in a statement. The average estimate of seven analysts surveyed by Bloomberg was for profit of 20 cents. Revenue fell 7.81 percent in the first nine months of the year partly due to a mark-to-market loss of $23.6 million from Greenhill’s investment in Iridium Communications Inc. (IRDM), according to the statement. Third-quarter revenue declined 28 percent to $60.4 million from the year earlier.
Greenhill, run by Chief Executive Officer Scott Bok, 52, is trimming assets to focus on the financial-advisory business. The company said this month it’s selling its remaining stake in Iridium over two years to fund repurchases of its own stock. Iridium closed yesterday at $5.85 a share in New York trading, giving Greenhill’s stake a value of $56.2 million, according to data compiled by Bloomberg.
“In recent weeks we have taken further steps to accelerate the liquidation of the investments that remain from the merchant banking business we announced our exit from two years ago,” Bok said in the statement. “The continuing liquidation of those assets will generate cash that can be largely returned to shareholders, as well as reduce the potential for large mark-to -market impacts on our results of the kind we saw this quarter.”
Advisory Fees Decrease
Greenhill now owns about 13 percent of McLean, Virginia,- based Iridium, Bok said in a conference call after earnings were reported.
Greenhill reported a 14 percent decrease in advisory fees in the third quarter, which fell to $83.2 million from the year earlier. For the nine months ended Sept. 30, advisory fees totaled $217.3 million, up from $195.5 million in the same period a year earlier.
Greenhill spent $30.4 million on compensation expenses in the third quarter, or 50 percent of revenue, compared with $44.2 million, or 53 percent, in the year-earlier period. For the first nine months, compensation decreased to $108.4 million, or 54 percent of revenue, from $114.7 million, or 53 percent.
Deal volume slowed in the third quarter as weaker economic growth and concern over the European debt crisis delayed transactions. Companies worldwide announced $525.5 billion in mergers and acquisitions in the period, compared with $647.2 billion in the second quarter and $620.8 billion in the first, according to data compiled by Bloomberg.
Greenhill ranks 15th on the M&A financial advisory league tables, with $66.4 billion in announced deals so far this year. The firm’s biggest transaction this year -- advising AT&T Inc. on its proposed $39 billion purchase of T-Mobile USA Inc. from Deutsche Telekom AG -- could be blocked if an antitrust suit brought by the Justice Department succeeds.
Greenhill declined 83 cents, or 2.3 percent, to $34.72 in New York trading today.
To contact the reporter on this story: Laura Marcinek in New York at firstname.lastname@example.org.