BlackBerry Ltd. (BB) Chief Executive Officer Thorsten Heins stands to make $55.6 million if he sells the company and is ousted.
That’s the amount he’s entitled to receive if BlackBerry has a change of control and Heins is pushed out by the new owners, according to a May proxy filing. The figure, which includes salary, incentive payments and equity awards, is based on BlackBerry’s stock price at the end of the fiscal fourth quarter. The plan was approved by shareholders at its annual meeting on July 9.
Shares of BlackBerry jumped more than 10 percent on Aug. 12 on speculation that the struggling Canadian smartphone maker will be bought, broken up or taken private, bringing a windfall to investors. The Waterloo, Ontario-based company announced plans that day to form a board committee to consider a potential sale, as well as joint ventures and partnerships.
The board probably shouldn’t have created an exit package that offers so much money for selling the company, said Sameet Kanade, an analyst at Jacob Securities Inc. in Toronto.
“The onus of structuring that contract was on the board,” Kanade said. “It’s a lot of money. The board should be looking out for shareholders.”
Prem Watsa, a Toronto businessman and BlackBerry’s largest shareholder, is stepping down from the board, fueling speculation that he may play a role in rescuing the company. Still, finding potential buyers may not be easy. BlackBerry bankers JPMorgan Chase & Co. (JPM) and RBC Capital Markets quietly contacted possible bidders for almost a year and found little interest in acquiring the company, said two people familiar with those discussions.
“We’d be open to looking at it,” Michael Sabia told analysts on a conference call today. “Our judgment of it would depend on what the specific conditions were -- the returns, the structure of the deal.”
Sabia’s comments echo those made by other pension funds, including the Canada Pension Plan Investment Board, which last week said it would consider investing in BlackBerry if the opportunity arose. Caisse de Depot oversaw assets worth about C$185.9 billion ($180 billion) as of June 30.
“Whether we do it or not, I can’t tell you,” Sabia said. “I have no idea because that’s not something that’s on the table as we speak.”
The shares fell 4.1 percent to $10.51 today in New York.
If Heins is terminated without a change of control, he is entitled to $22 million in salary, incentive payments and equity awards, based on the March 28 share price. The payout would include his base salary of $3 million and about $72,000 in benefits and retirement savings. He also is eligible for an annual incentive payment of $2.8 million, which climbs to $4.5 million in a change-of-control scenario.
The equity awards are valued at $16.1 million if he’s simply terminated and $48 million if it happens at the hands of new owners. The documents don’t specify what might occur in a more complex breakup situation.
As of yesterday’s close, the shares are trading 24 percent below the March 28 price on which the company’s payout scenario was calculated. Adjusting for the difference, Heins would be eligible for a payout of about $44 million, according to Bloomberg calculations.
Adam Emery, a spokesman for BlackBerry, declined to comment on the package.
Heins was named CEO in January 2012, replacing co-founders and co-CEOs Mike Lazaridis and Jim Balsillie, who stepped down after shareholders demanded a management shakeup. At the time, Heins was the company’s chief operating officer, having joined BlackBerry in 2007 after more than two decades at Siemens AG. (SIE)
Heins was initially criticized for saying BlackBerry didn’t need “drastic” changes, though he went on to make big moves at the company. He named new sales, marketing and legal chiefs, and eliminated 5,000 jobs as part of an effort to cut $1 billion in operating costs. He also closed six of the company’s 10 manufacturing plants.
Even as he scaled back the size of the company, Heins was counting on the release of new BlackBerry 10 phones to restore its former glory. The first of the new models, the touch-screen-equipped Z10, was unveiled in January at a lavish New York event. It didn’t fare well with consumers, selling almost 1 million fewer units last quarter than estimated.
Heins first hired JPMorgan and RBC to advise the company on its strategic options last year, though he stressed at the time that the banks were focusing on potential partnerships and software licensing deals. When pressed, he said he couldn’t rule out a sale of the company, though that wasn’t the “main direction” he was pursuing. The tone changed this month: BlackBerry’s Aug. 12 statement was the first time the company confirmed in writing that it would consider takeover offers.
BlackBerry created Heins’s compensation package after consulting an index of technology companies, including Amazon.com Inc., Nokia Oyj (NOK1V) and Yahoo! Inc., according to the filing in May.
“It was determined that while Mr. Heins’s total direct compensation was conservative compared to the median of the comparator group, it provided a strong pay-for-performance orientation,” the company said.
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