Last week, Petrohawk Energy Corp. (HK) announced that the company would be sold to BHP Billiton Ltd. (BHP) in a $12.1 billion cash deal. Since that news broke on July 14, shareholder Astor BK Realty Trust filed suit to enjoin the sale, alleging – according to a Bloomberg article – that —The board’s acceptance of BHP’s offer demonstrates the company’s all-too-eager-to-sell mentality.
We don’t know whether that’s true or not, but the 8-K that Petrohawk filed July 20 reveals that BHP Billiton has given lucrative Retention Agreements to several of Petrohawk’s top executives as an inducement to stay with the company for a period of time after the deal closes, assuming that it does close.
As one might expect, Chairman of the Board and Chief Executive Floyd Wilson got the most generous Retention Agreement, a document that ensures him a minimum of $6 million, and very likely quite a bit more. And that’s on top of the money Wilson will get for his equity interests and other sources, although it’s too early to know how much he will get for those.
Most interestingly, Wilson agreed to become a consultant for the company for 6 months; the agreement states that
“…Mr. Wilson will provide services to the Company (which shall be no more than 20% of the average level of services performed by Mr. Wilson for the Company over the 36-month period immediately preceding the effective date of the Consulting Agreement).”
For putting in no more than a 20% work week for those few months, the company will pay Wilson a cool $3 million, even if the arrangement ends early.
But there’s more. In addition to keeping Wilson’s base salary at its current rate of “at least” $1 million, he is poised to get a $2 million retention payment. The company also agreed to give him a prorated portion of his 2010 bonus for the bonus year ending on December 31, 2011. (He got $2.5 million as a 2010 bonus, but since it’s going to be prorated for this year, this is the number we can’t estimate).
The 8-K then discloses that Petrohawk has divided other executives into four categories covered by as many varieties of Retention Agreements: 90-day executives, 180-day executives, 2014 executives, and 2012 executives. For the six individuals protected by these agreements – all at the level of Executive Vice President or above – the money varies from several hundred thousand (for those at the low end) to a few million (at the high end). Since the exhibits are actually just forms, the 8-K provides the best clue as to who is getting how much.
And then there are three other lucky executives who aren’t quite at the EVP level who also got retention agreements, but the company only states they will get “lower payments” without disclosing how much lower that means.
We’ll keep an eye open for the Merger Proxy when it’s filed and hopefully get some more insights into the deal when that happens.
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