This CEO May Get $100 Million for Getting Fired

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Actavis Plc and Allergan Inc. Chief Executive Officers Discuss Merger

David Pyott, chief executive officer of Allergan Inc.

Photographer: Scott Eells/Bloomberg

Allergan Inc. Chief Executive Officer David Pyott could receive about $100 million if he’s terminated following Actavis Plc’s acquisition of the Botox maker.

The payment would include about $89 million in cash and stock he’d receive in exchange for equity awards that haven’t yet vested, according to a Feb. 19 filing from Irvine, California-based Allergan. Pyott would also receive $9.91 million in cash, as well as $2 million for accrued pension and health benefits for three years, according to the filing.

Actavis said in November it would purchase Allergan for about $65 billion -- last year’s largest announced pharmaceutical deal -- to become one of the world’s 10 biggest companies in the industry. Pyott’s payout would trigger if Dublin-based Actavis, which keeps its operational headquarters in Parsippany, New Jersey, elects to terminate him.

Actavis said in a Dec. 16 statement that it plans to replace most of Allergan’s current executives with its own. The company didn’t say what role Pyott would have. The deal is scheduled to be completed this year. Actavis CEO Brent Saunders will lead the combined company, according to a statement at the time of the deal.

“It might seem like an outlandish sum to the public eye, but in CEO-land, it’s a fairly standard arrangement,” said Erik Gordon, a professor at the University of Michigan’s Ross School of Business. “Given the stakes in these takeovers, cashing the guy out from what he’s already earned, that’s an easy pill for the board to swallow.”

Botox, Implants

Bonnie Jacobs, a spokeswoman for Allergan, declined to comment beyond the filing. David Belian, an Actavis spokesman, didn’t immediately respond to a call and an e-mail seeking comment.

Allergan got 84 percent of its revenue from sales of eye-and skin-care and cosmetic-enhancement products such as Botox, according to the filing. The company also makes treatments for dry eye, glaucoma and acne, as well as eyelash-thickening products and breast implants, according to its website.

Under the company’s current change-in-control policy, Pyott would qualify for receiving the payments if the company terminates him for reasons other than for cause. He’ll also collect the payments if he decides to leave because there was a “material reduction” in his pay or his job responsibilities were diminished, the filing shows. He would also qualify if his place of employment is moved more than 50 miles.

Pyott’s equity figures account for those that have vested this year and are valued at yesterday’s closing price. Pyott was paid $17.8 million in 2014, more than half of which was options granted in February 2014, according to Allergan’s summary compensation table.

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