Actavis’ pre-holiday dump

July 7, 2014

It’s pretty rare for a holiday to fall on a Friday. But when it does, it makes the usually juicy “Friday Night Dump” seem like an over-cooked hot-dog. Once the markets closed on Thursday at 1 p.m., the filing floodgates opened wide: we counted 174 8-Ks filed after the markets closed on Thursday.  We’ve flagged a dozen of those for our footnotedPro subscribers.

Still, one of the most surprising filings on Thursday was filed before the markets closed. This 8-K, which was filed by Actavis late Wednesday, became available first-thing Thursday morning and it nearly took our breath away. Earlier in the week, Actavis received approval from the FTC for its acquisition of Forest Laboratories, a $25 billion deal that had been announced back in February.

But nothing in the many things that have been written about the deal since then disclosed what the company did on page 6 of Thursday’s 8-K. Buried below a bunch of other merger-related disclosures was the news that Actavis was handing out “merger success awards” to several of its top executives, including newly named CEO Brenton L. Saunders and Executive Chairman Paul Bisaro, who had been CEO of Actavis up until the deal closed. We checked the many pages of filings that have been made since the February merger announcement — several of which were over 300 pages — and couldn’t find a single other reference to merger success awards.

Saunders, who only joined Forest Labs last September, is set to receive a “merger success” award target of $15 million, with a potential to earn a maximum of $30 million. Bisaro’s merger success award target amount is $10.5 million, with the maximum at $21 million. But as we began to delve deeper into Thursday’s filing, we realized that was really just the beginning. Saunders could get more than $68.5 million in compensation and Bisaro could take home more than $49.6 million, taking into account the maximum amounts they could earn.

While hefty payouts are not uncommon when it comes to M&A, the scale of it just boggles the mind. So does the limited disclosure up until this point. We would like to clarify that much of that amount that they potentially could get is tied up in equity related to performance goals spread out over three- to five-year periods. But still.

Here’s a snip from the filing that caught our attention:

“Under the Employment Agreements, Mr. Saunders and Mr. Bisaro each will (i) receive an annual base salary of $1,000,000 and $750,000, respectively, subject to periodic review by the Compensation Committee of the board beginning in fiscal year 2015; (ii) be eligible to receive annual cash incentive compensation payments with a target award opportunity of 150% and 140%, respectively, of each Executive’s respective base salary, a threshold award opportunity of 0% of the target award opportunity, and a maximum award opportunity of 225% of the target award opportunity, which in each case will be payable based upon the attainment of corporate financial targets and broad strategic initiatives established by the Compensation Committee; (iii) receive an equity grant consisting of (A) performance-based restricted stock units, which will have an aggregate grant date fair value of $25,650,000 and $19,125,000, respectively, and (B) options to purchase ordinary shares of Actavis, par value $0.0001 per share, having an aggregate grant date fair value of $8,550,000 and $6,375,000, respectively; and (iv) receive merger success awards with target values of $15,000,000 and $10,500,000, respectively, and the opportunity to earn up to a maximum of 200% of the target award.”

One would think that with that kind of haul, the executives wouldn’t sweat the small stuff. But that’s not the case here. In addition to those hefty payouts, both Saunders and Bisaro will get benefits that includes $110,000 in “private air transportation allowance for personal use” each year; up to five weeks of vacation every year; and an automobile and a driver — whose financial details weren’t made available.

The company’s largesse didn’t just extend to its top two executives. Other executives stand to reap in millions of dollars too.  Robert Stewart, chief operating officer; William Meury, EVP of Commercial, North American Brands; David Buchen, EVP of Commercial, North American Generics and International; and Todd Joyce, CFO, has each been set a merger success award target of $5 million, with a maximum opportunity of 200% of the respective officer’s target award — amounting to $10 million for each.

The company said that “in recognition of certain executives’ contributions to ensuring the success of the Merger and as a retention and performance incentive,” they would also get performance-based awards. Stewart’s performance-based award will be $6.3 million; Buchen, $5.4 million; Meury, $4.73 million; Joyce, $4.16 million.

In connection with the closing of the merger, the company granted option awards amounting to $2.1 million for Stewart, $1.8 million for Buchen, $1.58 million for Meury, and $1.39 million for Joyce.

Given the hefty awards, we’re actually surprised the company didn’t wait until late on Thursday to dump this.

 

 

Posted in: Agreements, Compensation

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Companies Mentioned: Actavis plc, Forest Laboratories, Inc.,
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