Yesterday, clinical-stage pharmaceutical company Pharmasset, Inc. (VRUS) filed regulatory documents related to the proposed acquisition by Gilead Sciences, Inc. (GILD), a deal valued at approximately $11 billion. If shareholders approve the acquisition, they’re slated to get $137 per share – a rather tidy premium of 89%, over the $72.67 that the stock closed at on the Friday before the deal was announced on November 21.
But shareholders aren’t the only ones who will benefit from the acquisition, as the Schedule 14D-9 shows. The officers and directors of the company will come into some even bigger bucks, thanks to the fact that the change in control clause will accelerate the vesting of their currently-unvested stock options. They’ll also get pro-rata bonuses and severance (plus ongoing benefits) if they are terminated within 18 months after a change in control occurs.
The biggest check, by far, will go to Pharmasset’s President and Chief Executive, P. Schaefer Price. If he’s terminated within 18 months after Gilead acquires Pharmasset (assuming the deal goes through), he could end up with more than $36.43 million. Most of that will be in exchange for the cancellation of his 399,950 unvested stock options and a pro-rated bonus. But if he’s terminated within 18 months after the deal closes, he will get more than $1.74 million in severance and $61,714 to pay for benefits. But that’s actually small when compared to the stock that Price holds. Update: As the WSJ’s Scott Thurm pointed out in this post shortly after the deal was announced, Price stands to make $255 million once the deal closes.
Other named executive officers will also become instantly richer if the deal goes through: CFO Kurt Leutzinger will get more than $13.18 million for his unvested options and bonus (plus $357,000 more if he’s terminated); Chief Medical Officer M. Michelle Berrey will get more than $13.5 million for her unvested options and bonus (and $354,000 more if she gets the axe); Chief Scientific Officer Michael J. Otto will get nearly $11.25 million for his unvested options and bonus (and another $317,000 if he loses his job); and Chief Development Officer Michael D. Rogers is in line for more than $10.29 million for his options and bonus (plus close to $326,000 if he’s canned).
And then there’s Pharmasset’s non-employee directors, who will receive a collective $11.6 million for their restricted shares of stock if the deal goes through. The filing notes that “None of the Company’s executive officers (including Mr. Price, who is also a member of the Board) held any Company Restricted Shares as of December 1, 2011.”
According to this Bloomberg article from yesterday, Pharmasset’s stock dipped last week after some investors “grew concerned that Gilead will walk away from the takeover if Pharmasset faces delays in the development of its oral drug for hepatitis C.” Yet most of the sources reporter Tara Lachapelle cited predicted that the odds of Gilead walking away from the deal are low. We bet that Pharmasset’s officers and directors – even more than the company’s shareholders – are counting on those odds to pay off in a big way.
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