Who Wants to be a Merger Millionaire?

November 3, 2010

In today’s episode of “Who Wants to Be a Merger Millionaire?,” we tune in to Hawk Corporation (HWK), a company that supplies friction products for the transmissions, clutches, and brakes used in vehicles, airplanes, and farm, mining, and construction equipment.

Carlisle Companies, Inc. (CSL) is buying Hawk in a $413 million cash deal that gives stockholders $50.00 per share. That’s about where the stock has been hovering lately – it closed at $49.99 yesterday – but that’s almost twice as much as it sold for before Hawk announced it was considering “strategic alternatives.”

But enough about the past. Let’s meet Ronald Weinberg, who – together with Norman Harbert and Byron Krantz – collectively own about 34% of Hawk’s outstanding shares and 100% of its Series D Preferred Stock. They’ve agreed to sell their shares, but will that be enough to make them merger millionaires?

Weinberg, Hawk’s Chairman and CEO, co-founded the company and has served as a director since 1989. To be sure, 21 years in a variety of senior executive roles gives one a lot of experience, although it’s at a modest-sized company that has a current market cap of less than $388 million.

Well, the SC 14D9 filed Nov. 1 discloses that Weinberg will be a merger millionaire! In fact, assuming the deal closes, Weinberg will walk away with $73,181,188 in cash. About $63.7 million compensates Weinberg for his stock and vested restricted shares, but he’ll get almost $6.29 million as the option spread value for his vested options, more than $2.39 million for severance and health benefits, $107,000 for a success bonus, and $689,000 for his Series D shares.

While $73.18 million is a lot of money, Weinberg’s employment agreement actually entitled him to about $10.9 million in severance and tax gross-ups. But he agreed to take “a significantly reduced severance package” of $2.39 million in severance, together with health benefits for 18 months, two life insurance policies with a combined face value of more than $4.07 million, and “Other benefits, including use of his office and assistant through June 30, 2011.” Weinberg will leave the company after the deal closes, which is projected to happen by the end of the year.

Of course, Weinberg’s not the only merger millionaire from the Hawk/Carlisle deal. Norman Harbert, Chairman Emeritus of the Board, Founder and Director, will get more than $56.6 million; and Brian Krantz, Secretary and Director, will get nearly $14.77 million. The other directors and NEOs don’t fare too badly, either, with their respective payments ranging from $2,385,350 for director Dan T. Moore, III (who has served since 1989) all the way down to $172,900 for director Richard Marabito (who was appointed to the board in 2008).

There are many reasons to strike a deal, and you’ll find Hawk’s justification and historical account on pages 15-27 of the filing. But these principals are getting hefty checks from the sale of a relatively small company. And that’s all it takes to become a merger millionaire.

Image source: brizzle born and bred via flickr

————

See more of what’s in the filings: Check out FootnotedPro, where we highlight unusual opportunities and potential problems well in advance of the market. For more information or to inquire about a trial subscription, email us at pro@footnoted.com.

Leave a Reply

You must be logged in to post a comment.