Potash CEO’s big payday won’t decide the deal

August 25, 2010

Half a billion dollars is normally sufficient to sway the minds of mortals. But in the case of Potash Corp’s potential sale to BHP Billiton, don’t expect such a big payday to decide the outcome of the deal. The fertilizer miner’s boss Bill Doyle has sat on larger sums before and held tight. With his golden parachute less than 6 percent of the payoff, he has no obvious incentive to shortchange shareholders with a quick flip of the company.

True, even if Potash shareholders go for the BHP deal on offer Doyle would become one of the top corporate earners of the past decade in North America. And it’s hard to imagine that so lucrative a package of stock options as Potash doled out to Doyle was entirely necessary to motivate him over the years.

Still, it is difficult to build up much moral outrage when a $100 investment in the firm when he took over in July 1999 would now be worth $1,746. Not only has the stock soared above Canada’s TSX 60 index, it has also dwarfed returns for rivals Mosaic and Agrium.

Whether Doyle feels inclined to collect his prize is another matter. Even before BHP came along, his holdings were worth around $380 million — enabling him to exit a wealthy man. At BHP’s $130 a share bid, the Potash potentate would collect $445 million in stock alone. At $146, the current price of Potash stock, he’d receive $500 million.

But Doyle, 60, has some reason to be confident this value would not disappear if BHP failed to take control. At the height of the food crisis two years ago Potash stock topped $230. Many of the trends that powered this surge — notably the change in dietary habits in fast-growing developing economies — remain in place.

There’s an extra fillip for Doyle in selling, of course. He’d get $28 million in severance and accelerated stock options from a change of control. But at just 6 percent of the current value of his options, it’s hard to see that as a motivating force, not least because he’d eventually receive much of that money anyway, according to compensation experts at The Corporate Library.

Chief executives regularly downplay personal motives that could create conflicts with shareholder interests. And Doyle’s assertion that he doesn’t care about the money strains credulity. Even so, his incentives are aligned with those of other shareholders. BHP can’t rely on impatience from Doyle to get Potash at a bargain price.

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