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Guggenheim Securities’ decision to help two former Pfizer executives as they withdrew from a shortlived alliance with an activist investor targeting the drugmaker has strained a relationship that has generated more than $170mn in fees for the Wall Street boutique.
Former Pfizer chief executive Ian Read and ex-finance chief Frank D’Amelio abruptly pulled their support for Starboard Value’s efforts to shake up the drugmaker late last Wednesday, just 72 hours after the hedge fund’s $1bn stake in the company was revealed.
The genesis of their statement was as puzzling for Wall Street and Pfizer insiders as its content: the press release was issued on the pair’s behalf by Guggenheim, which has advised on nearly $400bn worth of completed and attempted Pfizer deals since 2011.
Guggenheim, led by famed dealmaker Alan Schwartz, has no formal role in the Starboard-Pfizer contest, but now finds itself at the centre of one of the messiest activist battles in Wall Street history.
The fallout threatens to undermine its relationship with a key client from which it has generated an estimated $172mn in fees since 2011, most recently $48mn from the $43bn takeover of cancer drugmaker Seagen, according to LSEG calculations.
Starboard is due to meet Pfizer’s CEO Albert Bourla and chief independent board director Shantanu Narayen at the drugmaker’s New York headquarters on Wednesday. The investor will present its deck to the pair, which argues the company frittered away the windfall from its blockbuster Covid-19 vaccine and antiviral on a costly $70bn deal spree.
Shares in Pfizer are down more than 50 per cent from their pandemic peak, giving it a market value of $166bn as of Tuesday.
Starboard has been weakened by Read and D’Amelio’s withdrawal of support. Jeff Smith, the investor’s chief executive, last week said the pair had swung their support behind Bourla after a Pfizer representative allegedly threatened them with litigation, compensation clawbacks and the cancellation of unvested stock.
Hours before Read and D’Amelio withdrew their support for Starboard’s campaign, the investor offered to indemnify them for any legal and public relations costs, said two people familiar with the matter. The hedge fund did not, however, promise to compensate them for other losses if legal action succeeded, these people added.
Shortly before the statement was published, a Guggenheim representative made a courtesy call to a Pfizer insider to notify the drugmaker of the boutique’s role. Despite Guggenheim’s deep and lucrative ties to Pfizer, the drugmaker is instead using PJT Partners, led by star Wall Street dealmaker Paul Taubman, as its defence adviser.
Pfizer, Guggenheim, Starboard and PJT Partners declined to comment. Read and D’Amelio did not immediately respond to requests for comment.
It took decades for Guggenheim to achieve the status of Pfizer’s de facto house M&A adviser, and now that relationship could be under threat. Schwartz and Read have known each other since the 1990s when the Scottish executive was climbing the ranks of the drugmaker.
Schwartz, then a high-ranking executive at Bear Stearns, was on the other side of the negotiating table when Pfizer bought Warner Lambert for $90bn in 2000. Following that transaction, he advised on many of the drugmaker’s deals. After Bear Stearns collapsed in 2008, Schwartz moved to Guggenheim, bringing Pfizer as a client with him.
One person briefed on Guggenheim’s thinking framed its role as one of peacemaker, with Schwartz acting as an éminence grise. The M&A adviser was “best-positioned to know all the parties involved”, putting it in a “pretty helpful place” to issue the statement, explained one person, who added: “This is not about chasing mandates.”
Others said Read and D’Amelio, who alerted Pfizer to his involvement in Starboard’s campaign with seemingly misfired emails to Bourla and three other board members, simply needed help with issuing a press release.
Fares Noujaim, a Guggenheim banker, remains close with Read, having previously owned a property in the same luxury condominium as the former Pfizer CEO in Miami’s Sunny Isles Beach neighbourhood. Schwarz hired Noujaim from Bank of America after both men separately advised Read on Pfizer’s botched £69.4bn takeover of British drugmaker AstraZeneca.
D’Amelio, who was known for playing hardball with bankers, regularly used Guggenheim as Pfizer’s main adviser when he was chief financial officer.
Pfizer on Tuesday announced Mortimer Buckley — the recently-departed chair and CEO of Vanguard, its largest shareholder — was joining its board, wrapping up a recruitment process kicked off in May. Pfizer is gearing up to announce a volley of good news to push back against Starboard in the coming weeks, said a person briefed on the plans.
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