Nutter has pushed forward to explore a sale over the objections of PGW's union, the city's public advocate, and some City Council members. The mayor has said he would sell PGW only if the price were right.
"As I have said from the outset, the only sale outcome acceptable to me is one that benefits taxpayers and customers," the mayor said in a statement to be released Wednesday.
The brokers will solicit and identify qualified bidders, review responses from bidders, and provide analysis and guidance on the bids to the city.
Both JPMorgan and Loop Capital were implicated in the pay-for-play scandal during the administration of Mayor John F. Street involving the late lawyer Ronald A. White. City officials said that did not disqualify them from the PGW deal.
Loop got extensive Philadelphia pension-fund and city business after it hired White as a $5,000-a-month consultant. Loop was not charged in the 2004 federal indictment against White and former city Treasurer Corey Kemp, who was convicted in the corruption scandal.
Charles LeCroy, a former managing director at JPMorgan Securities, pleaded guilty to wire fraud for helping arrange an illegal $50,000 payment to White, the central figure in the corruption case. The bank fired him.
Suzanne Biemiller, Nutter's first deputy chief of staff, said that both firms had done extensive work with the city in recent years without incident and that their proposal for marketing PGW was the "most thorough" of the three teams of brokers that were interviewed.
"That gave us comfort," she said.
JPMorgan has worked as adviser on 15 gas utility transactions representing more than $20 billion in value since 2000, according to the city.
Loop Capital, whose headquarters are in Chicago, has co-managed more than $6.4 billion in municipal bond financings for the city.
The brokers will receive a commission of 0.45 percent of the sale price up to $1.6 billion, and 2 percent of anything above that price. "The split is designed to incentivize the brokers to get a more competitive price for PGW," said Biemiller said.
JPMorgan, as lead broker, will receive 75 percent of the fees. Loop Capital will get 25 percent. Both companies maintain offices in the city.
The city agreed to pay up to $140,000 of the brokers' expenses if a sale were not completed, Biemiller said. The expenses include travel, incidental fees, and the cost of maintaining a data room on PGW's finances.
"We anticipate robust interest from companies wanting to buy PGW and we intend to use our knowledge, skill and experience to attract a compelling offer that meets the objectives of the city and its constituents," said Paul Dabbar, managing director of JPMorgan's global mergers and acquisitions group.
The selection of a broker is the latest move in the city's protracted effort to privatize PGW, the nation's largest municipal utility.
The city promised the Pennsylvania Public Utility Commission that it would study a sale after the PUC granted a rate increase in 2009.
The city hired Lazard Freres & Co. in 2010 to conduct an in-depth assessment of a sale. Lazard completed the study in 2012 and estimated that PGW might sell for as much as $1.85 billion and net the city as much as $496 million after paying off the utility's liabilities.
The city assembled a team of legal, financial, and communications advisers last year and agreed to pay them as much as $2.7 million. Lazard was retained as financial adviser.
Biemiller anticipates that the first round of offers will come in this summer. A second round of bidding from a narrowed field would be held later in the year.
Any transaction must be approved by City Council and by the PUC.
Contact Andrew Maykuth
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