Tracking the King-Pfizer deal…

October 18, 2010

Just last week – on October 12 – the news broke that Pfizer, Inc. (PFE) planned to acquire King Pharmaceuticals, Inc. (KG) for $3.6 billion in cash, which worked out to $14.25 a share. That price represented a 40% premium over the stock’s final trading price from the prior day.

And, just as they always do, a pack of law firms immediately started chasing the deal, allegedly on behalf of King’s shareholders. (Call us cynical, but we suspect that the investigations aren’t entirely selfless.) Over the past week, at least a dozen law firms have opened investigations into the propriety of the deal.

We’ll leave them to sort that out, but we picked up an interesting scent from this 8-K that King filed last Friday afternoon at 5:03 p.m. It seems that on the day prior to its announcement of the deal, the Compensation and Human Resources Committees of King’s board of directors, together with the full board of directors, agreed to a wide range of changes that will affect King’s directors and executive officers.

The changes were to the company’s Severance Plans, the Incentive Plans, the Equity Incentive Plans, and the Deferred Compensation Plans. They are spelled out in just five paragraphs, which make them too long to include here verbatim, but short enough to read by anyone who is interested in the deal. In a nutshell, the changes are intended to clean up the loose ends so that it’s clear what King’s employees get (and what they don’t get). In fact, the merger plan with Pfizer is even referenced. Keep in mind that the deal was announced last Tuesday, yet the 8-K wasn’t filed until Friday afternoon.

There’s no indication at this point what the payoff will be to King’s top leaders, but we’ll chase the numbers and let you know when we find them.

Update: At 5:29 p.m. tonight, King filed an amended 8-K to correct “an inadvertent error in the first sentence of the second paragraph under ‘Equity Incentive Plans.’ We have noted the changes in bold type to make it easier for you to read.

The old version (filed 10/15/10) stated: “Each such stock option, RSU, Director RSU, restricted stock award and PSU would be cancelled in exchange for the offer price payable under, and as defined in, the Merger Agreement, except for stock options with exercise prices less than the offer price, which would be cancelled without any payment therefor.”

The new version states: “Each such stock option, RSU, Director RSU, restricted stock award and PSU would be cancelled in exchange for the consideration payable under, and as defined in, the Merger Agreement, except for stock options with exercise prices greater than the offer price, which would be cancelled without any payment therefor.”

Image source: Ewan-M via flickr

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