June 2 (Bloomberg) -- Pepsi Bottling Group Inc. Chairman and Chief Executive Officer Eric Foss will get at least $16.5 million if PepsiCo Inc.’s takeover attempt succeeds.

PepsiCo offered April 19 to buy Pepsi Bottling and PepsiAmericas Inc., its largest distributors, for about $6 billion in cash and stock. Pepsi Bottling rejected the offer two weeks later, calling it “grossly inadequate.” PepsiAmericas said the offer was “not acceptable.”

Foss, who has worked for PepsiCo’s largest soda distributor since it was spun off a decade ago, earned $6.1 million in salary, bonus and stock grants in 2008. He would get more than twice that in severance pay and stock benefits if the PepsiCo deal goes through, according to data compiled by Bloomberg from regulatory documents.

The so-called golden parachute, first approved by independent directors on May 3, is “common to ubiquitous in these transactions,” according to John Coffee, a corporate and securities law professor at Columbia University Law School in New York.

“The usual justification is that it does permit management to appraise the fairness of the offered price with greater objectivity,” Coffee said May 29 in an e-mail. “The real issue remains, is the price fair?”

Poison Pill

The retention agreements “were put in place to ensure continuity of management and to protect the best interests of PBG’s shareholders,” Mary Winn Settino, Pepsi Bottling’s vice president of investor and public relations, said May 22 in an e- mailed statement. She declined to discuss details of the plan and said Foss wasn’t available for an interview. A company spokesman said again yesterday Foss wasn’t available.

PepsiCo sued Pepsi Bottling and several directors on May 11, claiming they adopted a “poison pill” takeover defense that restricts its rights as a shareholder.

In the lawsuit, PepsiCo also called the severance agreement with Foss and six other executives “knee jerk” and said it should be invalid because Pepsi Bottling directors from PepsiCo weren’t invited to the meeting. Pepsi Bottling reconvened the board on May 18 and again approved the package with the PepsiCo board members abstaining, it said.

PepsiCo could still push its challenge to the retention agreements in court “due to the heightened scrutiny applied to such arrangements,” Justin Lumiere and Les Levy, analysts with ICAP in Jersey City, New Jersey, wrote in a May 28 note.

‘Objective’ Appraisal

Dave DeCecco, a spokesman for PepsiCo, declined to comment on Foss’s severance or the lawsuit. Foss didn’t previously have a change-in-control agreement that covered a takeover by PepsiCo.

PepsiCo, based in Purchase, New York, offered the equivalent of $29.50 a share for Pepsi Bottling Group. The proposal was a 17 percent premium over the company’s previous closing share price on April 17.

Somers, New York-based Pepsi Bottling gained 96 cents, or 2.9 percent, to $34.17 at 4:01 p.m. in New York Stock Exchange composite trading. PepsiAmericas, based in Minneapolis, increased 58 cents, or 2.2 percent, to $26.92 while PepsiCo rose $2.24, or 4.2 percent, to $55.37.

Pepsi Bottling Group forecast comparable 2009 earnings of $2.30 to $2.40 a share, 10 cents more than its April projection, according to a statement today. The company said U.S. soda sales have picked up while fuel and ingredient costs have declined.

PepsiCo may save as much as $850 million in expenses with a three-way combination, Pepsi Bottling executives said today during a conference call. That exceeds the more than $200 million PepsiCo has estimated.

Salary, Benefits

If PepsiCo buys the rest of Pepsi Bottling, Foss’s retention agreement pays him twice his almost $1 million annual salary and twice his target incentive bonus of $1.5 million. He would get another $750,000 in prorated incentive bonus, assuming an exit date of June 30.

Foss also could cash out previously unexercisable stock options and unvested stock awards, which would be worth about $10.7 million at PepsiBottling’s closing share price yesterday of $33.21.

In addition to the $16.5 million salary, bonus and stock payout, Foss would be entitled to two years of medical, dental and vision benefits, $50,000 worth of outplacement services and a lump sum payment of early retirement benefits. Foss’s early retirement age will be dropped to 50 from 55. He turned 51 on May 11.

Foss’s total compensation package in 2008 was valued at $7.5 million by Securities and Exchange Commission reporting rules, according to a filing. That included pension benefits and other compensation, such as the use of corporate aircraft.

PepsiCo spun off its soda distribution unit into Pepsi Bottling Group in 1999 so it could consolidate bottlers to cut costs without taking the debt onto its balance sheet. Pepsi wants the bottler back to regain control over soft-drink sales and boost distribution of Gatorade sports drink as soda volumes decline and non-carbonated beverages grow more popular.

To contact the reporter on this story: Duane D. Stanford in Atlanta dstanford2@bloomberg.net.

Last Updated: June 2, 2009 16:29 EDT