Pharmaceutical services company INC Research has proposed paying compensation worth up to $11.4 million to top executives who end up leaving the company in the wake of its $4.6 billion acquisition of rival inVentiv Health.
The Raleigh-based company also could be on the hook for between $70.7 million and $82.1 million in termination fees, under certain circumstances, if the acquisition falls through, according to INC’s proxy statement filed Friday. If the deal does collapse, INC also could end up reimbursing inVentiv for up to $10 million in deal-related expenses.
INC and Boston-based inVentiv announced the deal, billed as a merger, last month. It will create a Raleigh-based company with more than 22,000 employees in 60 countries whose combined revenue last year would have been $3.2billion, making it one of the world’s largest contract research organizations, or CROs. CROs help pharmaceutical and biotechnology companies conduct clinical trials of experimental drugs and analyze the results.
InVentiv is the larger company with roughly double the revenue of INC, but INC shareholders will own 53 percent of the combined company, which will employ more than 1,000 in Raleigh. Alistair Macdonald, the CEO of INC, will lead the combined company as CEO, while inVentiv CEO Michael Bell will become the executive chairman.
If Macdonald were to be terminated or if he resigns for “good reason” within 24 months after the deal is completed, the golden parachute outlined by the company calls for a $3.2 million cash severance payment – amounting to three times his annual base salary plus one year’s incentive payment. Macdonald would also stand to collect $8.2 million in outstanding stock options that would become fully vested, according to the proxy.
The other top executives that would be in line for golden parachutes if they depart the company are:
▪ Greg Rush, INC’s chief financial officer, who will become CFO of the combined company. His golden parachute would call for $1.8 million in severance and $8 million in vested stock options.
▪ Michael Gibertini, chief operating officer at INC, would receive a golden parachute consisting of $1.8 million in severance and $5.9 million in vested stock options. Gibertini has been named president of clinical development for the therapeutic business units of the combined company.
▪ Christopher Gaenzle, INC’s chief administrative officer and general counsel, who will retain that title with the combined company. His golden parachute would consist of $1.6 million in severance and $4.8 million in vested stock options.
INC shareholders are being asked to vote on the golden parachutes but the vote, which is required by the Securities and Exchange Commission, is non-binding.
If the merger is completed, the proxy states, the golden parachutes could be paid to a departing executive “even if INC Research common shareholders fail to approve the advisory vote regarding merger-related compensation.”
The proxy also notes that the deal with inVentiv was preceded last year by discussions regarding “a potential transformative transaction with another participant in the life sciences industry.” However, INC and the unidentified life sciences company were unable to reach an agreement.
INC’s initially offered to acquire inVentiv for stock valued at $4.5 billion, and inVentiv countered that the business was worth $4.8 billion. Ultimately, they settled on a $4.65 billion deal.