What's CFO "Sandman" Bertolini's Sch-Merck-in' Haul Gonna' Look Like -- Post Merger?

Just as I did with "Flight Attendant" Cox, and Mr. "Con-Air" Hassan, before him, earlier -- I have made an "order of magnitude" estimate of the "all-in" payoff due Schering-Plough CFO Bob "Sandman" Bertolini, should he depart within two years of the reverse-merger's closing date (other than for "cause" -- i.e., only if he commits some truly-egregious error). Again, these figures do not make any estimate for IRS Section 280G payments -- but if the same are due, he will be grossed up for them. [Click at right to enlarge.] Even without the IRS gross-up, he'll come in somewhere between $90 million and $116 million -- assuming he is let go by Merck.

Like Mr. Hassan, Mr. Bertolini's take was greatly underestimated when The Wall Street Journal reported on this, last week -- because the figures it relied upon made no estimate whatsoever of the equity values each executive receives, in compensation. I have corrected, in broad strokes, below, for this oversight. Note that for every $1 that Schering-Plough's stock price rises above $22.91, Mr. Bertolini will receive about $5.2 million in additional payouts. If the merger were to close at tonight's NYSE price of $24.05, Mr. Bertolini's take would be almost $95.2 million.

So, more specifically, here: Mr. Bertolini is due various previously granted stock options of 250,000 shares (at $18.20), 50,000 shares (at $20.70), 200,000 shares (at $20.70), 48,000 shares (at $19.23), 192,000 shares (at $19.23), 276,000 shares (at $18.85), 52,000 shares (at $18.85) and 264,600 shares (at $22.91). So, all of these are exercisable at various prices between $18.20 and $22.91 per share. [I have dropped from the tally, the options that aren't likely to be in the money: they are 46,000 shares, and 184,000 shares, each exercisable at $31.57 -- but do not forget about these, if by some miracle, Schering-Plough trades into the $31.60 range by merger time.]

Don't forget -- he has his 208,000 share option "mega-grant" from November 2003 -- exercisable at $15.87.

He also has the 2003-era 350,000 deferred stock units, and the February 27, 2009 deferred stock unit grant of 208,000 shares -- free and clear. Finally -- he has his "all other performance based" stock units covering 200,159 shares -- if just the target amounts are paid out in 2009, and early 2010. Now, to calculate -- [I advise making another Excel spreadsheet!] on the options, it is simply a matter of subtracting assumed NYSE market prices, from exercise prices -- and multiplying by numbers of shares -- to reach his potential gain, at any given NYSE quoted stock price. Similarly, on outright share-grants, one multiplies the full NYSE stock price, times the total number of shares -- all of those share-gains are his to keep. Simple -- and simply dizzying -- given the sheer-size of these numbers.

For the top three, then -- we are now approaching $300 million in likely payouts, post-merger. Where is that "Schering-Plough Survey on Executive Pay", anyway? Did you send yours in? Be sure you do.