New reasons for Smurfit-Stone’s CEO to celebrate…

February 16, 2011

When Smurfit-Stone Container (SSCC) announced it would be taken over on Jan. 24, it was a pretty good day for us: It was the first company to be acquired of those we put on our January 14 list of the Top 10 M&A targets for 2011; two weeks later, a second of our picks also announced it would sell. But it looks like one of Smurfit-Stone’s executives has even more reason to celebrate than we do.

That would be Patrick J. Moore, the company’s CEO. Just yesterday, he signed an amended agreement that extends the term of his job, which had been set to end no later than March 31, 2011. But the takeover by RockTenn (RKT) is expected to close sometime during the second quarter of 2011, and Smurfit-Stone wants Moore to stick around a little longer to “…provide continuity of executive leadership.”

The deal actually provides a huge raise for Moore for as long as the job lasts. After Smurfit-Stone emerged from bankruptcy, it signed an employment agreement with Moore in July, 2010 (available here) that provided him with an annual salary of $1.107 million; that works out to $92,250 per month. The new agreement (Exhibit 10.7 to yesterday’s 10-K) – signed Feb. 15, but retroactively effective to Jan. 1, 2011 – pays Moore a gross salary of $295,000 per month – giving him $202,750 extra cash. (And, because the raise is effective retroactively, the company agreed to pay Moore the difference between the two salaries for the past six weeks, which means that he will get an additional paycheck for approximately $304,125.)

The other noteworthy change to the employment agreement adds a clause stating that Moore “…shall not be entitled to participate in or receive any payments under the 2011 Management Incentive Plan.” However, assuming the deal closes during the second quarter of 2011, as the company expects, Moore’s payout under the MIP very likely would have been a pro-rata share that he wouldn’t have received until 2012. The new deal, on the other hand, fattens Moore’s bank account before he leaves the company. And that’s a pretty sweet parting gift from the board and the shareholders, if we do say so.

Image source: Smurfit-Stone website

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