Good morning Hubsters. MK Flynn here with today’s Wire.
Mega Merger Monday. The week kicks off with a big pharma deal: Pfizer just announced it is buying Global Blood Therapeutics for $5.4 billion. GBT makes Oxbryta, a daily pill for patients with sickle cell disease.
“Sickle cell disease is the most common inherited blood disorder, and it disproportionately affects people of African descent,” said Albert Bourla, chairman and CEO of Pfizer. “We are excited to welcome GBT colleagues into Pfizer and to work together to transform the lives of patients, as we have long sought to address the needs of this underserved community. The deep market knowledge and scientific and clinical capabilities we have built over three decades in rare hematology will enable us to accelerate innovation for the sickle cell disease community and bring these treatments to patients as quickly as possible.”
In May, Pfizer agreed to buy migraine pill maker Biohaven Pharmaceutical for $11.6 billion.
Succession. Finding and retaining talent is the Number One challenge for private equity firms these days, and apparently that holds true even at the top spot of the biggest PE firms.
In a surprising move, Carlyle announced last night that CEO Kewsong Lee is stepping down.
The abrupt departure comes months before Lee’s five-year contract was due to finish at the end of 2022, Private Equity International’s Carmela Mendoza points out.
Carlyle named Lee sole CEO in 2020, less than three years after the firm’s founders – William Conway, David Rubenstein and Daniel D’Aniello – handed over the reins to Glenn Youngkin and Lee.
Lee joined Carlyle in 2013 as deputy CIO for corporate private equity and was previously a dealmaker at Warburg Pincus.
Conway will serve as interim chief while the search for a new candidate takes place. Lee will assist in the leadership transition, according to Carlyle. An office of the CEO has been established, comprised of Peter Clare, CIO for corporate private equity and chairman of Americas PE; Mark Jenkins, head of global credit; Ruulke Bagijn, head of global investment solutions; Curtis Buser, CFO; Christopher Finn, COO; and Bruce Larson, chief human resources officer.
The abrupt departure comes as the $376 billion firm diversifies its asset base and earnings streams amid a strategic plan that includes a fundraising goal of at least $130 billion by 2024, Carmela writes. More than half of Carlyle’s fundraising now comes from global credit, infrastructure, renewables and solutions, according to the firm’s second-quarter results.
Lee and the board directors clashed over his contract in recent discussions, said a person familiar with the matter, according to Bloomberg. Shares of Carlyle have dropped 31 percent this year, underperforming rivals including Blackstone and Apollo.
ESG under siege. Lynn Forester de Rothschild, or Lady de Rothschild, as she’s referred to in the UK, has had an incredible career, perhaps best known as the former chief executive of the EL Rothschild family office, which includes The Economist as one of its holdings. In recent years, she has been a leading voice for the ESG movement. Putting her money where her beliefs are, she founded Inclusive Capital Partners, an investment firm focused on generating long-term returns while making a positive impact on the environment and society.
Buyouts’ Gregg Gethard interviewed Forester de Rothschild recently. Here’s a brief excerpt:
ESG appears to be at an inflection point. There are still many questions about how to actually implement change.
ESG is under siege. Some of the criticism is very well deserved. Attacks on ESG are justified, like the extreme case we recently saw at a financial institution in Germany where there was an actual misrepresentation of ESG.
But even beyond flagrant misrepresentation, there is way too much ESG product being shopped. There are a lot of ESG products presented by managers to make pension systems feel good by putting on an ESG label and there is nothing in the investment process that actually advances those goals. Shame on the asset management industry for not taking the legitimate desires of pension systems to invest in ESG seriously.
Because of those mistakes and the instances of malfeasance, we have given an opening for people to say that ESG goals don’t matter. All that matters, to people who hold these views, is that we need to only make our widgets and our guns and a profit for shareholders. To me, that criticism is not legitimate.
I think the solution starts where pension systems ask themselves if they are in the “check-the-box business,” or if they actually believe in the investment theses that greater shareholder value will be created by companies that profitably solve the problems of the planet. I say this from real experience. Some of the most bloviating proponents of ESG in the pension system business are the ones that invest with the check-the-box people who are not serious. And if pension systems are serious about ESG goals, they need to have metrics in place they impose on their managers that require reporting.
Recommended reading: Carried interest is safe from a tax increase, thanks in part to Senator Kyrsten Sinema (D., Ariz.) -– at least for the moment. If you want to learn more about the lobbying efforts that went on behind the scenes in the last few weeks, as well as the history of how the American Investment Council evolved over the last 15 years, check out the Wall Street Journal’s story on the “tax-code provision with nine lives.”
That wraps up today’s Wire. I’ll be back with more tomorrow.