Guggenheim caught in Starboard-Pfizer crossfire

One scoop to start: Klarna is offloading most of its UK “buy now, pay later” portfolio to US hedge fund Elliott for undisclosed terms, in a deal that will free up as much as £30bn for new loans, according to people familiar with the matter. 

And another PE scoop: The UK-listed private equity firm Bridgepoint has agreed to sell a minority stake in its software company Kyriba to General Atlantic at a more than $3bn enterprise valuation, marking a roughly three-fold increase from when it acquired the business in 2019, DD’s Ivan Levingston and Alexandra Heal report.

In today’s newsletter:

• Guggenheim caught in Starboard-Pfizer battle 

• The French battle over Sanofi’s future

• Goldman’s big trading payday

Guggenheim caught in Starboard-Pfizer battle 

It took famed Wall Street dealmaker Alan Schwartz decades to build a relationship with Pfizer, which his firm Guggenheim counts among its most lucrative clients. 

All that work may have been undone with a 64-word press release that crossed the wires late on Wednesday last week, reports the FT’s Oliver Barnes, and DD’s James Fontanella-Khan and Maria Heeter.

Just 72 hours after throwing their weight behind an activist campaign targeting Pfizer and its chief executive Albert Bourla, Ian Read, Bourla’s predecessor who hired him into the role, and ex-finance chief Frank D’Amelio dramatically withdrew their support for hostile shareholder Starboard Value, which owns a $1bn stake. 

“We are fully supportive of Pfizer chairman & CEO Albert Bourla, senior management and the board, and we are confident that over time they will deliver shareholder value,” the pair said in the statement. But the genesis of their statement was as puzzling for Wall Street and Pfizer insiders as its content: the press release was issued on their behalf by Guggenheim.

Jeff Smith, Starboard’s chief executive, last week said the pair had swung their support behind Bourla after a Pfizer representative allegedly threatened them with litigation, bonus clawbacks and the cancellation of unvested stock. Starboard offered to indemnify Read and D’Amelio for legal and public relations costs — but the pair still ran for the hills.

Guggenheim has raked in an estimated $172mn in fees from advising Pfizer on nearly $400bn of completed and attempted acquisitions since 2011 — more than any of its rivals, according to LSEG calculations.

Schwartz’s boutique advisory firm advised on botched takeover attempts of Botox maker Allergan and Anglo-Swedish drugmaker AstraZeneca, as well as Pfizer’s set piece $43bn buyout of cancer drugmaker Seagen last year. 

Now, despite playing no formal role in the battle between Pfizer and Starboard, Guggenheim has found itself in the crossfire of one of the messiest activist campaigns in recent Wall Street memory. Instead, Pfizer has tapped rival boutique PJT Partners, run by Paul Taubman, to serve as its defence adviser. 

In addition to advising Bourla on the Seagen deal, the biggest acquisition of his tenure, Guggenheim also has deep ties to the former executives who briefly agitated against him.

Schwartz first met Read in the nineties when he was climbing Pfizer’s ranks. He then won Pfizer as a client after Bear Stearns collapsed in 2008. Fares Noujaim, a top Guggenheim banker, owned a property in the same luxury condominium as Read in Miami.

Starboard will present Pfizer with its decks outlining how the drugmaker wasted its Covid windfall on a costly $70bn deal spree, leaving its share price down more than 50 per cent on its pandemic peak. 

Why Guggenheim issued that statement last week still left Wall Street scratching its head. Perhaps Schwartz is trying to position himself as a peacemaker between the two parties? Or perhaps Read and D’Amelio, who alerted Pfizer to Starboard’s plans with a seemingly misfired email, just needed help sending a press release.

Dealmaking the French way

France has tried to convince corporate powers all over the world that it is a prime destination for international investment. But it’s also known for protectionist tendencies.

Those two clashing attitudes were on full display this week as debate over the €15bn sale of Sanofi’s consumer pharmaceutical division to an American private equity firm heated up.

Talks between Clayton, Dubilier & Rice and Sanofi were confirmed last week after the US firm’s offer edged out a consortium led by French private equity group PAI.

Nothing’s a done deal yet, and political forces across the spectrum have come out against the purchase. Sanofi’s divestment of its consumer business has sparked a backlash because France typically is protective about foreign takeovers of its largest companies.

France’s industry and financial ministers have reminded everyone that they could block a transaction if the government’s requirements — including on jobs, industrial footprint and medicine production — aren’t met.

The deal has also pitted two of the country’s biggest M&A rivals against one another: Lazard is advising CD&R, while Centerview Partners is with the PAI consortium. 

People close to the deal have said the reaction was “not unexpected and not unusual” given “there are well-known social processes in France”, especially when an “outside buyer” is involved.

A person close to CD&R said they were “not particularly” nervous that the debate would throw a wrench in negotiations, but that “France’s concerns were being taken seriously” with a bunch of commitments expected to be announced later this week.

The current terms being negotiated involve Sanofi selling a 50 per cent controlling stake to CD&R while the French pharma giant would keep the other half for up to five years. French officials raised the possibility that the state could also take a stake.

While CD&R’s in pole position, people close to PAI have argued that a French firm would help assuage some of the sovereignty concerns.

Goldman’s not so great expectations

For Goldman Sachs, it’s easier to clear the bar when it’s set low. 

The bank’s third-quarter profits jumped 45 per cent to $3bn, handily beating past analysts’ estimates. But a big driver of that outperformance was its juggernaut trading business where just five weeks ago chief executive David Solomon had warned that revenues could fall close to 10 per cent. 

In the final figures, Goldman’s trading revenues ended up rising 2 per cent thanks to a steep jump in stock trading, echoing strong performances from JPMorgan Chase, Bank of America and Citigroup.

Investment banking — the other half of Goldman’s Wall Street business — also had a better than expected quarter, with fees rising 20 per cent to $1.9bn.

Solomon said the group’s backlog of potential deals grew this quarter and that activity levels in mergers and stock sales were still below 10-year averages, adding to optimism that fees will increase further. (Goldman is set for a $93mn payday next year if the $36bn sale of Pringles maker Kellanova to Mars goes through.)

Goldman continues to pay the price for an ill-fated foray into consumer lending. It took a $415mn pre-tax hit from moving its credit card partnership with General Motors to Barclays, exiting small business lending and writing down the GreenSky business it sold last year even further.

Goldman is pinning much of its long-term growth on its asset and wealth management division overseen by Marc Nachmann. That business exceeded $3tn in assets under supervision this past quarter. It may be where Goldman can actually raise the bar on expectations.

Job moves

• State Street’s chief financial officer Eric Aboaf will leave the group in February. He will take the same role at S&P Global. 

• The communications group Greenbrook has appointed former European Commissioner Lord Hill as an adviser. David Trenchard, who previously was at Elliott and Morgan Stanley, has also rejoined the firm as an adviser.

• Deutsche Bank has hired UBS media and entertainment banker Aly Alibhai to lead North American M&A, Bloomberg News reported.

Smart reads 

Rich interns It’s no secret working at a high-speed trading hedge fund is lucrative, FT’s Alphaville writes. But just how much money are we talking? Exhibit A: Jane Street interns make more than Jay Powell or Keir Starmer. 

Water woes Britain’s privatised water companies need to raise billions of pounds of equity by 2030, the FT reports. Tap water might get a whole lot more expensive as a result. 

Secretary Dimon Rumours that JPMorgan chief Jamie Dimon could be the next US Treasury secretary have persisted for decades, Bloomberg writes. This year, the chatter is as loud as ever.

News round-up

Boeing seeks up to $35bn to bolster its balance sheet (FT)

Citigroup and BofA join other big US banks in beating gloomy forecasts (FT)

UK tax rises acceptable if part of pro-business Budget, CBI chair says (FT)

Activist Palliser pushes for change at AI chip investor SK Square (Wall Street Journal)

LVMH reports fall in third quarter sales and warns of ‘uncertain’ outlook (FT)

EU and British energy groups call for rewrite of post-Brexit trading arrangements (FT)

UK to raise bank ringfencing threshold to ‘improve competitiveness’ (FT)

ASML shares drop sharply after warning on semiconductor recovery (FT)