There are winners and losers in mergers, and as a general rule, executives win and at least some workers lose. That certainly is the case with Actavis ($ACT) and Forest Laboratories ($FRX). While nearly 200 Forest employees in the St. Louis, MO, area got pink slips this week, top execs will receive up to $186 million in "merger success awards" for closing the $25 billion deal.
Actavis is closing a Forest facility in Earth City, MO, and laying off 190 employees that work in a variety of roles from distribution and logistics to research and development, the St. Louis Business Journal reports. The facility will close June 15, according to a statement emailed today from the company. Logistics and warehousing done there will be moved to a facility in Gurnee, IL, by the end of the year. The company told the newspaper that employees in the company's regional sales unit in St. Louis are unaffected by the move.
But while layoffs were being finalized, Fortune reports that Actavis last week made a securities filing disclosing that half a dozen execs were slated to share $50 million in bonuses with completion of the Forest deal. The real upside comes if sales goals are met. The bonuses, including stock options, could swell by $136 million.
Fortune's Lauren Lorenzetti notes that, "While such payments are not unheard of in merger deals, the scale of Actavis' promises was huge."
CEO Brent Saunders gets $15 million up front and up to $68.5 million as goals are met, while Chairman Paul Bisaro gets $15 million up front and up to $49.6 million in future payouts. Chief Operating Officer Robert Stewart, Chief Financial Officer Todd Joyce, and William Meury and David Buchen, executive VPs of branded and generic drugs, will each receive $5 million initially and an average of $16.9 million each as goals are met.
Of course, layoffs are also expected in mergers as companies eliminate overlapping operations, saving expenses to help pay for buyouts. After completing its $8.5 billion merger last fall with Warner Chilcott, the company did an assessment of the combined U.S. sales teams and decided to eliminate 30% of them, cutting 350 of the 1,100.
In its statement, Actavis said, "When we announced the proposed acquisition of Forest by Actavis in February, we recognized the challenge of combining two businesses, which have overlapping functions and capabilities," the Business Journal reports. "We want all employees to understand that this decision does not reflect on the commitment of the legacy of Forest teams in Earth City, Missouri."