Allergan Completes Acquisition of ZELTIQ Aesthetics

April 28, 2017 – Allergan completed their acquisition of medical technology company ZELTIQ Aesthetics (ZA).  The $2.4 billion deal, announced in February 2017, offered $56.50 in cash for each ZA share held.

 

So what? In my release on April 27, I mentioned that many deals in which shareholders didn’t approve the compensation element of the merger were because of Single-Trigger cash payments and Gross-Up payment.* 

Case-in-point.  ZA shareholders voted 99.94% in favor of the deal.  The compensation vote only received 48.81% approval.  Why?  Shareholders received 29.9% and 36.8% premiums for the 30 and 90-day stock prices, respectively.  To show their appreciation, they overwhelmingly approved the deal.

However, looking at the compensation data, we see that all four named executives are receiving some form of single-trigger cash payment.  Additionally, two execs are eligible for Gross-Up payments of up to $1.3 mil and $828k.  Shareholders don't like these shenanigans and they voted accordingly.  

To beat this dead horse, the compensation vote is a non-binding, advisory vote.  In other words, “thanks for the advice ZA voters, but we’ll take our pay and be on our way.”

Only a completely different not, over the last 6 years, Health Care Equipment deals averaged 99.8 days to complete.  This one only took 74 days.  Interesting…or just me showing off? 

*A Gross-Up payment is made by the company to make the executive whole in the amount of compensation he/she receives.  If the executive receives an ‘excess parachute payment they will be charged with a 20% excise tax.  The company says, “we don’t want you to pay that, so we’ll pay it for you.”  This is an oversimplification, obviously.  See my Journal of Business & Finance Librarianship article for a more detailed account.