Schering CEO Hassan's Merck Payout Is Millions Greater Than WSJ Thinks It Is
The Wall Street Journal notes today that in the merger of Merck and Schering-Plough, CEO Fred Hassan "would receive an exit payout of $17.7 million, pension benefits of $13.2 million and medical benefits valued at $130,750." That's a total of about $31 million. But a closer look at the SEC filing shows that Hassan could walk away with much, much more than that: as much as $77 million by one calculation.
Just yesterday, BNET reminded readers that according to Schering's 2008 proxy statement, Hassan stands to get $51 million if a "change of control" occurs at Schering.
So why does the WSJ put Hassan's payments at a mere $31 million and change? Because the WSJ isn't counting all the stock and other benefits that Hassan and his crew will gain in the merger. Let's crunch some numbers:
Page 90 of the S-4 filing dated May 20 states:
Hassan's agreement has not been amended since he joined Schering-Plough in 2003 other than as required by changes to income tax regulations.So his most recent contract outlined in the 2008 proxy -- the one where he gets $51 million for signing Merck's papers -- is still in effect.
The S-4 then details these payouts and benefits to the top five execs:
- Cash
- Bertolini, $7,122,000
- Cox, $8,106,000
- Hassan, $17,736,000
- Koestler, $4,922,348
- Sabatino, $5,595,300
- "Enhanced medical and other welfare benefits"
- Bertolini, $218,908
- Cox, $269,930
- Hassan, $130,750
- Koestler $182,050
- Sabatino $211,831
- "Unvested stock options" at prices between $18.85 to $31.57
- Bertolini, 552,932
- Cox, 577,934
- Hassan, 1,818,966
- Koestler, 436,366
- Sabatino, 370,332
- "Unvested deferred stock"
- Koestler 325,000 (None of the others get any, apparently)
- "Performance shares":
- Bertolini, 185,510
- Cox, 207,766
- Hassan, 626,156
- Koestler, 134,415
- Sabatino, 125,862
- "Enhanced pension benefits":
- Bertolini, $13,905,200
- Cox, $7,664,200
- Hassan, $13,179,700
- Koestler $5,362,000
- Sabatino, $3,839,900
Any amounts that have been deferred into a director's deferred compensation account will be paid to the director in a lump sum in cashIf you add up all that, and make the assumption that Hassan gains all his unvested shares at the lower end of Schering's price range ($18.85), then Hassan could potentially walk away with $77 million.Any portion of the director's deferred account that is denominated in Schering-Plough common stock, will be cashed out at the highest price paid...
Shearlings Got Plowed also disagrees with the WSJ's reading of the numbers, and has a scenario in which Hassan gets $173 million, largely based on stock.