A peek at Gymboree’s stylish acquisition…

October 26, 2010

Dressing impossibly cute kids in equally cute clothes is a big business, as evidenced by private investment firm Bain Capital’s agreement to buy Gymboree (GYMB) for $65.40 per share. The $1.8 billion offer price includes a premium of about 22 percent over Gymboree’s closing price on the day before the deal was announced.

Offering a premium, of course, is meant to persuade investors that they’re getting a good deal in exchange for surrendering their stock. (As always, we’ll leave it to the analysts to figure out whether they are or not.) But we did observe in Gymboree’s October 25 Schedule 14D9 that it appears to be an attractive deal for the company’s leaders.

Gymboree’s filing states that if we just consider the stock that the company’s executive officers and directors owned as of October 22, and if its executive officers and directors tender all 250,953 of their shares, they “will receive an aggregate of $16,412,326 in cash.” But that number doesn’t include their RSUs and options, which they’ll be paid for regardless of whether the interests are vested or unvested, thanks to an acceleration clause in the merger agreement.

Gymboree’s Chairman/CEO, Matthew McCauley, will receive the largest payout if the deal goes through. According to p. 5 of the filing, McCauley’s vested stock options, unvested RSUs, and restricted stock will entitle him to $26,321,103. If he’s then terminated after the change in control, McCauley will get $12,151,674 in severance, plus some money to pay COBRA health insurance premiums, which could add up to a payout of more than $34.5 million. (That’s less than simply adding the cash severance to the payment for options and restricted shares. Although it’s not clear why from the filing, Gymboree doesn’t include any payout for options in its severance table.)

The other NEOs will individually receive amounts that range between almost $1 million to nearly $13.5 million if they keep their jobs; however, if they are terminated following the merger, their payouts will range from $1.74 million to more than $19.6 million per executive.

The directors, meanwhile, will each receive checks that range between $850,200 and $1,803,595 for their ownership interests in the company.

Thus, if the deal goes through on the projected “Effective Date” – which is November 23 – the company’s directors and senior executives will be busier than usual, counting their blessings (and assets) when Thanksgiving rolls around two days later.

Image source: Gymboree

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