Sprint Nextel reveals bonuses, history of merger
Posted on Wed, Mar. 16, 2005
By DAVID HAYES and JASON GERTZEN
The Kansas City Star
The successful merger of Sprint Corp. and Nextel Communications could
earn the two architects of that union a series of bonuses and perks
worth more than $20 million apiece.
Two-year compensation packages that include cash bonuses, stock
grants, stock options and salary increases for Gary Forsee, Sprint's
chairman and chief executive, and Timothy M. Donahue, president and
chief executive of Nextel, were outlined Tuesday in documents filed
with the Securities and Exchange Commission.
The documents also detail, for the first time, the negotiations that
went into the $35 billion merger.
Forsee and Donahue each could receive a performance-based bonus of $10
million one year after the merger is completed. Each also could
receive a second, $10 million performance-based bonus two years after
the merger.
Sprint and Nextel board members approved the bonus plans — actually
amendments to the executives' employment contracts — in separate
committee meetings on Tuesday, according to documents filed with the
SEC. Such bonuses aren't unusual in large corporate mergers.
Under terms of the merger, which still must be approved by the SEC,
the Federal Communications Commission and stockholders, Forsee would
be chief executive of the merged company and Donahue would serve as
chairman. The two companies are hoping for those approvals by late
summer.
The companies declined further comment.
If the merger is completed, both executives also would receive a 16
percent raise, moving their salaries from $1.2 million to $1.4 million
a year.
In addition to the “long-term incentive” bonuses of up to $20 million
apiece, both Forsee and Donahue also could receive multimillion-dollar
annual bonuses, according to the companies' filings with the SEC.
Forsee and Donahue each also would be eligible for annual performance
bonuses of at least $2.3 million, topping out at $4.76 million.
In addition Forsee would be eligible to receive a one-time grant of up
to 62,000 restricted shares of stock of the new company — a bonus
worth more than $1.4 million at Sprint's current price — and up to
165,000 stock options.
In 2004, Forsee received compensation of $11.4 million, including
salary, bonuses, and stock grants and options, according to documents
filed with the SEC. More than $7 million of that came from restricted
stock, part of a four-year, $25 million package negotiated by Forsee
when he took over as Sprint's chief executive in March 2003.
Donahue's total compensation for 2004 was $3.7 million.
Bonuses and perks are common in blockbuster mergers.
John Zeglis, who was the chief executive officer of AT&T Wireless when
it merged with Cingular Wireless, received a $21.7 million
compensation package. The board of his company signed off on $7.4
million in severance pay for Zeglis, who planned to leave after the
merger was completed.
In January, Sprint announced a bonus plan for other company
executives. Eleven of the company's top executives will receive a
special cash bonus equal to their annual salary and short-term bonus
if they're still working for the company a year after the merger is
completed and the company's local phone operation is spun off as a
stand-alone company.
About 800 other executives will receive smaller bonuses, but the
company didn't disclose the size. The bonus plan was put in place to
keep top executives from leaving the company during the merger
process.
Sprint on Tuesday filed a combined proxy statement, outlining the
executives' salaries and, for the first time, laying out some of the
background of the merger.
The merger was approved by the boards of the companies in
mid-December, but executives of Sprint and Nextel had broached the
subject more than 10 months earlier.
During the week of Feb. 8, 2004, Donahue contacted Len Lauer, Sprint's
president. Would Sprint be interested in a “potential business
combination?”
The offer came about a week before Cingular Wireless agreed to
purchase AT&T Wireless for $41 billion.
Lauer told Donahue that Sprint wasn't interested at that time. That
answer likely resulted from Forsee's status. As chief executive of
Sprint for less than a year, Forsee was restricted from merger
discussions with other companies because of his former management role
at BellSouth.
Just over a month later, when those restrictions expired, Forsee and
Donahue talked. They had a series of discussions, deciding on April 6
to have formal “exploratory discussions” about a merger.
On Aug. 26, Forsee and Donahue suspended the negotiations. The two
companies had been unable to agree on “the economic terms of the
transaction, the composition of senior management of the resulting
company and the location of its headquarters.”
However, in October, about the time that the
FCC approved the
Cingular-AT&T merger, the Sprint board “discussed the pending and
expected consolidation in the telecommunications industry and the
potential benefits of scale and synergy benefits that could be
generated in a significant merger of telecommunications companies.”
Forsee, Donahue, Sprint Board member Irvine O. Hockaday Jr., and
Nextel Chairman William E. Conway Jr. discussed the merger over dinner
on Nov. 9, and negotiations resumed.
By the time those negotiations were completed, Nextel's headquarters
in Reston, Va., had been selected as the headquarters for a merged
company. Forsee was named chief executive, Donahue was named chairman
and the new company was named Sprint Nextel Corp.
The deal was finalized on Dec. 15.
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Source:
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