Given that we’re talking about two paper-goods companies here — Temple Inland (TIN), which plans to be acquired by International Paper (IP) — we should probably make clear at the outset that we mean “printing money” metaphorically. But the money involved is very real: Together, two of the executives involved could to collect well north of $100 million.
As always with deal payouts, there are various assumptions and conditions. Some of the money comes through if the deal is consummated; some of it only kicks in if a given executive loses his job within a couple years after the deal. Still, a lot of money hangs in the balance for top executives of Temple-Inland, to judge from the preliminary merger proxy, or PREM14A, that the company filed on Friday (at 5:29 p.m., just before the SEC’s electronic window closed for the week).
A big chunk of the payday would be in cash, since outstanding unvested options and restricted stock would be cashed out based on the deal price. For Temple-Inland’s chairman and chief executive, Doyle R. Simons, the cash-out value of his unvested options, restricted stock and related awards, plus associated dividends, works out to $29.6 million. Not bad for a guy who got those titles in late 2007, though he joined the company in 1992. (Curiously, we note he worked his way up by way of running the investor-relations office — not sure we’ve ever noticed someone anyone going that route before.)
For Chief Operating Officer J. Patrick Maley III, the equivalent figure is $23.7 million in cash. Maley actually worked at International Paper for 11 years before joining Temple-Inland in 2003. Other top executives could expect payouts ranging from $7.6 million to $12.1 million.
It’s worth keeping in mind that those equity cash-outs are for unvested stock and options — in other words, equity that the executive wouldn’t have actually earned the rights to yet absent a change of control: The right amount of time hasn’t lapsed, or performance measures haven’t yet been met. We’re sometimes a little puzzled why restricted stock and options — often handed out well before a deal is announced, to entice executives not to leave — should suddenly lose their retention or performance functions and become pure reward when a deal is done, but so it often goes.
Anyone let go after the deal, of course, stands to receive big severance payouts, in cash, stock and benefits. For Simons, the total comes out to $61.4 million, including $29.6 million in equity, $6.2 million in retirement benefits, $8.8 million cash (both severance and a pro-rated bonus for the year of termination), and three years of continued benefits and apparently unspecified perks — plus an estimated $16.6 million that the company would have to pay to cover his taxes on those goodies.
We aren’t the first to note Simons’ big deal payday — MarketWatch’s Bob Tita mentioned it in a piece on Saturday — but a bunch of other top Temple-Inland executives also stand to make a mint. Maley’s take on termination would total $47.8 million, with similar components, and the other top officers would see between $14.9 million and $20.2 million. Total bill for the top five officers in the proxy: more than $162 million.
Certainly, Temple-Inland’s management and board worked hard for at least some of that money. International Paper ultimately agreed to pay $1.40 a share more than its original $30.60 offer, after Temple-Inland dug in its heels and adopted a poison pill, among other measures.
Then again, when executives and directors own a sizable stake in the company — think Warren Buffett or Steve Jobs — that kind of work is its own reward. At Temple-Inland, it’s apparently just the beginning.
Image source: Jack Spades via Flickr
———
It’s fun dissecting merger proxies after the deal’s announced. It’s more profitable to spot deal signals before the market. Check out footnotedPro, where we highlight unusual opportunities and potential problems before other investors. For more information or to inquire about a trial subscription, email us at pro@footnoted.com
