|Forest Laboratories Chairman Howard Solomon|
A couple of years ago, Forest Laboratories Chairman Howard Solomon was a CEO under attack by activist investor Carl Icahn, accused of poor succession planning, mismanagement, and other weaknesses. Solomon and Icahn made peace; Icahn's criticism turned to praise. And Solomon passed the baton to new CEO Brent Saunders.
Now, Solomon is on the verge of reaping $46.7 million, thanks to Forest's ($FRX) impending $25 billion merger with the generics bigwig Actavis ($ACT), according to newly filed Securities and Exchange Commission (SEC) documents. Saunders is up for even more, provided he's out of a job after the deal closes: $8.8 million in cash, plus $34.2 million in equity, plus $90,000 worth of benefits--and a $10 million payment to cover tax liability from the deal. Total value: $53 million.
Not a bad retirement boost for the 85-year-old Solomon. The stock payoff doesn't include severance pay, because he was already on his way out; Solomon steps down as chairman after Forest's annual meeting this year. It does include immediate vesting of all his options and stock awards at the post-deal-announcement price, and a heap of Actavis equity.
For Saunders, who took the reins at Forest last October, it would be a quick return on the time invested in cutting Forest's costs, amping up marketing of its drugs, and snapping up a deal or two. But that assumes Saunders will be fired, or quit for good reason, sometime in the next three years.
|Forest Laboratories CEO Brent Saunders|
The registration statement filed with the SEC says Saunders will get a seat on the combined company's board and will have the right to hand-pick two other Forest directors to serve with him. As far as an executive job goes, the documents are more vague--the new company will be run by a team of managers selected from both companies--but Saunders' role as a director hints that he will be one of them.
Several other Forest execs stand to collect from the deal if they don't keep their jobs. Frank Perier, the company's EVP of finance, is in line for $3.3 million in cash plus $17.5 million in equity. EVP and commercial chief Elaine Hochberg would collect a similarly sized combo totaling $20.8 million. Forest's R&D chief, Dr. Marco Taglietti, would get $3.1 million in cash and $17.7 million in equity; and Howard Solomon's son, David Solomon, who's SVP of corporate development and strategic planning, is in line for $2.5 million in cash and $17.46 million in equity.
But no one individual at Forest nabs anywhere near the payoff for Icahn. That's estimated at $1.7 billion.
- read the SEC document
Special Reports: Pharma's top M&A deals of 2013 - Actavis/Warner Chilcott