http://www.businessweek.com/bwdaily/dnflash/jun2005/nf20050616_1121_db016.htm
Meanwhile, corporate-governance groups are sharply criticizing the $450 million that Kilts and 16 other top Gillette execs stand to receive in severance, change-of-control, and other benefits. “The Gillette merger could become a poster child for this kind of dealing aimed at producing a very rich executive payday,” says James Malican, president of Proxy Governance, a proxy-advisory firm based in Vienna, Va.
While company officials publicly said the deal could generate synergies of $14 billion to $16 billion, internal discussions suggested they would be much larger, ranging from $18.82 billion to $28.55 billion, or some $19 to $29 a share. Yet Gillette shareholders are getting just $9 a share of this value, Aggarwal wrote. The implication: Gillette may have been sold short.
Galvin also complains that UBS and Goldman are hardly impartial arbiters of the deal’s fairness. “The fairness providers were very involved in the creation of the deal,” he complains, noting that Goldman’s Paulson actually played a key role in restarting negotiations with P&G in January. Beyond that, both Goldman and UBS stand to earn up to $30 million if the deal is completed.
“How fair or accurate can it be when you have people who are compromised by their involvement in the deal?” asks Galvin, who compares this situation to asking a broker representing a prospective buyer of your house to do an appraisal of the house.
Making matters worse, Kilts is also receiving both a huge severance package from Gillette, plus a “raise” that Aggarwal values at $11.3 million for working for P&G for an extra year. Experts argue it’s highly unusual for a CEO to get a severance payment when he isn’t being fired, plus a bonus for staying on the job.