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Home » St. Jude Medical reverses course on covering top execs’ tax tabs

St. Jude Medical reverses course on covering top execs’ tax tabs

August 8, 2016 By Brad Perriello

Abbott to acquire St. Jude MedicalSt. Jude Medical (NYSE:STJ) reversed course on a pledge it made earlier this year not to cover some of tax tab its senior executives could incur after its $25 billion merger with Abbott (NYSE:ABT).

St. Jude’s board last year voted to do away with a “gross-up” provision that would have covered the 15% excise tax imposed by U.S. tax laws on stock owned by executives and directors for the 6 months before and after a merger transaction.

But after inking an $85-per-share deal in April to be acquired by Abbott, St. Jude moved to reinstate the gross-up provision, which could reportedly relieve CEO Michael Rousseau and other executives of $18 million in tax payments if they leave Abbott after the deal closes, expected by year-end.

The provision would save $5 million for Rousseau, according to the Minneapolis Star Tribune, plus a $3.3 million tab for president Dr. Eric Fain and $2.5 million for CFO Donald Zurbay. The benefit only applies if the executives are terminated without cause or leave for good reason after the deal closes, the newspaper reported; Abbott hasn’t publicly outlined its post-merger leadership plans

The gross-ups for executives aroused the ire of Medtronic shareholders who were exposed to capital gains taxes after its $50 billion deal to acquire Covidien closed last year (a federal judge in Minnesota later declined to bar the reimbursement plan). St. Jude’s shareholders are no exception, having filed at least 3 lawsuits seeking to block the deal in part over the proposed gross-ups, the paper reported.

Former CEO Dan Starks, who is still chairman and the company’s largest individual shareholder, is not eligible for the gross-up provision as the $18 million he set to pull down from the deal is not subject to the excise tax, according to the Star Tribune.

Filed Under: Mergers & Acquisitions, Wall Street Beat Tagged With: Abbott, stjudemedical

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