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Pfizer's Interest in Enzon May Create Jackpot Payday for CEO Buchalter

When Enzon (ENZN) became the focus of DellaCamera Capital's anger last summer, the investment group had four demands:
  1. It wanted its money back (in the sense that the stock it owned traded at $16 in 2004 but was worth only $7-and-change by 2009).
  2. It wanted the company's specialty pharma decision sold off.
  3. It wanted its own people on the board.
  4. And it wanted Enzon CEO and chairman Jeffrey H. Buchalter (pictured) fired, along with his excessive compensation of around $5 million a year for running a company that clocks less than $200 million a year in revenues.
Seven months later and we find that DellaCamera has checked three of those four boxes. (The stock is back up to $11, specialty pharma was sold in November, and a director palatable to DellaCamera has been installed.) Only the last one, Buchalter's continued presence, frustrates DellaCamera's ambitions for the company.

The fourth box may be about to be checked if rumors of Pfizer (PFE)'s interest in acquiring the company are true.

But rather than punish Buchalter -- the company has only really made progress since adult supervision arrived, in the form of directors appointed by DellaCamera and Carl Icahn -- the Pfizer scenario would actually reward Buchalter. According to page 17 of this SEC filing, if Buchalter is terminated following a change of control, he gets:

  • a cash payment equal to any unpaid base salary through the date of termination.
  • any earned bonus relating to the preceding fiscal year that remains unpaid.
  • a lump sum cash payment equal to three times the sum of his annual base salary and target annual cash bonus/
  • a pro rata portion of his target bonus for the period worked during the fiscal year in which the termination occurs.
  • all equity awards granted to Mr. Buchalter that have not vested immediately prior to the effective date of the change of control will vest at such time.
  • a gross up that will compensate him for having to pay taxes on the above.
  • health benefits, life and disability insurance paid for him and his family for the next six years.
The value of that package is easily north of $6 million. It's so extravagant that Enzon has modestly not provided a summary table of termination payments. Thus, investors will find out how much they paid for Buchalter only when it's too late to stop his reward going through.