Report: Pillsbury's Departing CEO Could Get Nearly $8 Million-plus
Dec. 21, 1988
MINNEAPOLIS (AP) _ Philip L. Smith, departing chief executive officer of the Pillsbury Co., stands to reap nearly $8 million from his five-month stint with the food and restaurant company, according to a published report Wednesday.
That doesn't include a pledge Smith won from Pillsbury this month, guaranteeing the equity in his $1.53 million house, said the Wall Street Journal report gleaned from merger documents and other filings.
During Smith's time at Pillsbury, the company waged an unsuccessful battle against a hostile takeover bid by Grand Metropolitan PLC and, on Tuesday, reported a 38 percent decline in second-quarter earnings, a continuation of its long-standing financial problems.
Smith, 54, said Monday that he planned to leave Pillsbury early next year when Grand Met takes over. He joined Pillsbury Aug. 1, giving up the job of chairman and chief executive at Philip Morris Co.'s General Foods Corp. unit. To woo him, Pillsbury made an offer that included $1 million in annual pay and substantial stock options, the Journal said.
Pillsbury's agreement Sunday to accept a sweetened $5.68 billion, or $66 per share, takeover bid from the British conglomerate, means Smith will get even more.
As a Pillsbury stockholder, Smith will be able to tender 75,000 shares for Grand Met, the Journal reported. At $66 apiece, that holding would gross $4.95 million.
Company documents indicate that Smith had purchased 3,000 of those shares before joining the company, the Journal said. Upon the acquisition, Smith will be able to sell the other 72,000 shares, which had been awarded as long-term incentives, the Journal said, quoting an unidentified Pillsbury spokesman. The merger agreement provides that restrictions on stock options for all Pillsbury executives would lapse. Smith, through the spokesman, on Tuesday declined to respond to inquiries about his compensation arrangements, the Journal said. He has said he expects to leave Pillsbury early next year, when Grand Met takes control.
When he became Pillsbury chairman, Smith was guaranteed $625,000 base pay, plus a bonus of $375,000 for the year ending next May 31. Under an agreement that Pillsbury modified in November with Grand Met in pursuit, senior executives would receive double their salary and bonus as ''liquidated damages'' in any change of control. Thus, Smith would be entitled to an additional $2 million. He also would receive annual retirement benefits of at least $200,000, the Journal reported.
On Dec. 2, Pillsbury guaranteed that Smith wouldn't lose money on the $1.53 million house he and his wife recently bought in Deephaven, the newspaper said. If Smith can't sell the house within six months of his termination following a change of control, Pillsbury would buy the residence for what he paid, the Journal reported.
When Smith arrived at Pillsbury, the company's restaurants were in financial trouble and the company was a rumored takeover candidate. The battle with Grand Met occupied much of his energies and gave him little opportunity to focus on operating problems.
Pillsbury attributed its earnings decline for the second quarter ended Nov. 30 to ''a substantial one-time investment in the Burger King advertising fund and the cost of responding'' to Grand Met's takeover bid.