Heinz CEO Johnson could receive $56 million 'golden parachute'

H.J. Heinz chairman, CEO and president Bill Johnson could receive a $56 million golden parachute, if he ends up out of a job after the $28 billion acquisition of the Pittsburgh food company goes through.

Estimates of how Heinz executives could be compensated as a result of the merger, as well as details on how the merger was negotiated, were released late Monday in a preliminary proxy filing the company made to the Securities and Exchange Commission.

Although a post-acquisition management structure has not been laid out, the filing indicates that 11 current and two former Heinz executives stand to receive more than $150 million in severance and other compensation if the acquisition is completed Aug. 1 and they are terminated or resign for good reason following the merger.

In that scenario, Mr. Johnson would receive $56 million, including $14.4 million in severance, $30.5 million from the accelerated vesting of stock options and restricted stock, $8.6 million in incentive payments and nearly $1 million in insurance benefits.

On top of that, Mr. Johnson would receive $99.7 million from options and restricted shares that have already vested, as well as $57 million in deferred compensation. Adding those numbers to his golden parachute produces a $212.7 million total payout.

"The payments reflect Mr. Johnson's success in creating billions of dollars in shareholder value over his successful 15-year tenure as president and CEO," said Michael Mullen, senior vice president of corporate and government affairs. He added that the compensation consists of equity that Mr. Johnson accumulated over his 30-year career with the company, including provisions in place long before merger was proposed.

The two retired executives, Michael D. Milone and C. Scott O'Hara, would collectively receive $9.6 million from accelerated vesting of options and restricted stock they continue to own after retiring last year.

That all depends on completing the deal to sell Heinz to investors who plan to take the company private. The sale, which still needs shareholder and regulatory approval, could go through by the third quarter.

Plans for the historic buy were set in motion in early December when 3G Capital partner Jorge Paulo Lemann met with Warren Buffett, chairman and CEO of Berkshire Hathaway, and proposed their two companies do a joint venture. Mr. Buffett was interested.

According to the merger timeline laid out in the filing, Mr. Johnson first met with Mr. Lemann and Alex Behring -- managing partner with New York-based 3G Capital -- for dinner Dec. 18, but no proposal was made at that time. On Jan. 10, Mr. Behring came to Pittsburgh again and said an offer would be made. Mr. Johnson said Heinz wasn't for sale, but he would alert the board.

The official acquisition proposal was delivered Jan. 14.

Among the issues the Heinz board and its advisers considered through the review process were the risk of the company continuing on a standalone basis in light of "generally unfavorable macroeconomic trends," including high unemployment and volatility in commodity costs, as well as the company's ability to support its quarterly dividend.

They looked at the potential that the company would receive other offers. Financial advisers felt that only a few companies in the food and beverage industry would be capable of buying Heinz and those were unlikely to be candidates.

In addition, the board discussed "the impact of a potential sale of Heinz on the city of Pittsburgh, Pa., as well as whether the investors would be willing to provide a commitment to maintaining Heinz's presence and heritage in Pittsburgh," according to the filing. A commitment to that effect was written into the contract.

On Jan. 22, the board's representative alerted 3G Capital that Heinz wasn't likely to keep discussing the deal unless the investors improved their offer. On Jan. 24, the higher number came in, described as the "best and final" offer.

By Feb. 11, Mr. Johnson, Mr. Behring and Mr. Buffett were doing lunch in Omaha, Neb. On Feb. 13, the board met in Pittsburgh to officially consider the offer. The vote was unanimous.

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Teresa F. Lindeman: tlindeman@post-gazette.com or at 412-263-2018. Len Boselovic: lboselovic@post-gazette.com or 412-263-1941. First Published March 5, 2013 3:30 PM


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