Are Financial Fed execs jumping the gun on deal?

January 5, 2010

Back in November, Financial Federal (FIF) announced that People’s United Financial (PBCT), a bank I used to cover very closely when I worked in New Haven, was buying the financing company for around $738 million. The deal caused a nice pop in Financial Federal’s stock after the news was announced.

But it was this 8-K filed yesterday that really caught my eye. While it’s pretty normal for shares — options, RSUs, whatever — to vest immediately once a deal closes, I honestly can’t recall a lot of situations where the shares vest “in anticipation of the pending merger” as the filing notes. Maybe I just haven’t stumbled on this before, but a quick scan of filings shows that this does seem very rare.

The amounts — as outlined in the 8K — are not insignificant. Chairman and CEO Paul Sinsheimer saw over 440,000 restricted shares vest immediately, which was worth $12.1 million. The Form 4, which was also filed yesterday, shows that Sinsheimer sold about 160,000 shares on Dec. 30. Seven other executives also sold shares on Dec. 30, according to a series of other Form 4s filed yesterday. The 8K shows that the shares were worth just shy of $30 million.

The 8-K explains the reasoning behind the early vesting as helping the executives avoid the excess parachute payment tax — known as 280G in tax lingo — and to eliminate the tax gross-up that People’s United would have been on the hook for post-deal. The filing also notes that Peoples United agreed to the accelerated vesting.

Still, given how some deals fall apart at the last minute, the whole thing still seems a bit unusual.

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