Inside Track: Behind the scenes of the Pfizer and Astrazeneca talks

Mark Kleinman
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IT WAS ever thus: investment bankers kick off the year talking up a economic environment ripe for throwing up industry-defining mergers and acquisitions.

By Easter, they’re conjuring up myriad reasons why said deluge of deals has failed to materialise. To date, 2014 has done little to disabuse that idea.

There are exceptions, of course, one of which would involve the combination of Astrazeneca and Pfizer to create a £150bn pharmaceuticals monolith.

Reports that talks have taken place contain some credence. Senior City sources say that initial discussions, held late last year, would have involved Astrazeneca acquiring its larger American peer.

The focus of the talks then changed, with Pfizer spotting an opportunity to deploy billions of dollars of surplus cash overseas – reaping substantial tax benefits – if it bought Astrazeneca.

Yet no negotiations have taken place since the middle of January. Analysts’ reaction perhaps explains why: the predilection of drug company executives for mega-mergers arguably precipitated a larger number of value-destructive takeovers than in any other industry (although miners and telecoms bosses could also lay claim to this unwanted accolade).

Future reshaping of the pharma sector more plausibly lies in the kind of asset swap deals and corporate alliances unveiled by GlaxoSmithKline and Novartis this week. And the pursuit of similarly surgical transactions would be equally valuable elsewhere – for the reputations of company bosses and bankers alike.

Wanted: corporate leader with expertise in banking and retail; must be willing to get hands dirty; appetite for governance reforms essential; readiness to take substantial pay cut preferable.

That’s about the sum of the job spec for the next chief executive of the Co-operative Group.

After Euan Sutherland’s brief horror show in charge, there’s unlikely to be a torrent of applications from those heading major British companies.

If the headhunters are thinking creatively, though, it would be surprising if the name of Gary Hoffman did not make their shortlist. True, he has only been running Hastings, the motor insurer, for little more than a year, but he possesses many of the credentials to run the UK’s biggest mutual in its hour of need.

As chief executive of Northern Rock in the aftermath of its nationalisation, he stabilised the bank and helped restore it to a position from which it could be sold back to the private sector. More importantly, his relish for the kind of turnaround challenge that the Co-op represents may mean that prising him away from an undoubtedly lucrative deal at Hastings, which is likely to seek to go public by 2016, is not out of the question.

Despite repeated warnings from institutional investors about the size of bank IPO syndicates, many still carry underwriting lists as long as your arm.

That’s no exception at Saga, the over-50s travel and financial services specialist, which wants to float in London later this year. This week, the company took prospective investors on a visit to Felixstowe, where its biggest call centre is based.

Preparations have not been without some controversy, however.

I’m told that at a recent analysts’ presentation, Saga refused access to insurance analysts, insisting that scribblers covering the leisure sector were more appropriate.

The other talking point is why Barclays, a long-time lender to Acromas, Saga’s parent, is not on the IPO ticket. Having also missed out on a role in its recent refinancing, perhaps its omission was to be expected.

Nonetheless, some difficult questions must be reverberating through Canary Wharf.

Mark Kleinman is the City editor of Sky News @MarkKleinmanSky