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Esmark Prepared Golden Parachutes for Severstal
The budget of the deal, whereby Severstal acquires U.S. Esmark Steel will probably go up. The company has a golden parachute program for top managers. Should the latter decide to leave Esmark Steel or be dismissed from it, Severstal will have to pay $9.3 million. Regardless, that amount doesn’t appear particularly impressive if compared with the deal size of $1.285 billion.
U.S. Esmark Steel that Severstal is buying out for $775 million ($1.285 billion with indebtedness), has informed SEC about the compensation due to the management in case of the change of ownership. Overall, Severstal will pay $9.3 million for the decision to dismiss top management of Esmark.
Granting golden parachutes is the global practice. It could be used to oppose unfriendly takeover and its key aim is to protect management against the actions of new owners. But the size of Russia’s golden parachutes couldn’t be compared with the western ones. The gold parachute of Mosenergo ex-CEO Anatoly Kopsov didn’t exceed 35 million ruble (roughly $1.5 million), and TGK-9 managers got just 20 million ruble (roughly $850,000).
According to Ivan Andrievsky, who is the managing partner at 2K Audit-Business Consulting, Severstal agreed to those terms when signing the deal. The expert said the company wouldn’t make the same mistake again, as Mittal Steel had defeated Alexei Mordashov in his battle for Arcelor exactly by promising to top managers to maintain all offices and authority, while Severstal had failed to do it that time.
The amount of $9.3 million is a negligibly small price for successful completion of the deal, commented Uralsib analyst Dmitry Smolin.
www.kommersant.com
All the Article in Russian as of July 07, 2008
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