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Macerich Executives to Get $32 Million Sweetener If Firm Is Sold

The shopping-mall operator said in its quarterly filing on Nov. 3 that it had adopted a cash-severance plan, ensuring that senior executives would get nice checks if they leave or are terminated within two years of a change in control.

(Bloomberg)—Until very recently, four top executives at Macerich Co. faced getting paid almost nothing if the firm were to be sold and they lost their jobs as a result. Now they’re eligible for more than $32 million.

The shopping-mall operator said in its quarterly filing on Nov. 3 that it had adopted a cash-severance plan, ensuring that senior executives would get nice checks if they leave or are terminated within two years of a change in control. Such a move could signal a company is gearing up for a sale.

Increased interest from activists and intensifying deal discussions among mall operators has led to speculation that Simon Property Group Inc., which offered to buy Macerich two years ago, will make another bid. At the time, the mall owner rejected Simon’s $16.8 billion proposal, saying it was too low.

“SPG might revisit its previous interest in Macerich in the right circumstances,” Wells Fargo analyst Jeffrey Donnelly wrote in a Nov. 17 note to clients. Earlier this month, Brookfield Property Partners LP bid about $14.8 billion to acquire the remaining shares in U.S. mall owner GGP Inc. as the companies seek to repurpose struggling bricks-and-mortar shopping centers.

Les Morris, a Simon spokesman, said it’s “not involved in any of the ongoing activity in the mall sector.” Macerich’s Jean Wood declined to comment.

Under Macerich’s new severance policy, four senior managers would get triple the sum of their base salaries and annual bonuses if they’re dismissed after a deal. The four would also benefit from the vesting of equity awards and receive outplacement services and extended health benefits.

Chief Executive Officer Arthur Coppola, who’s led the Santa Monica, California-based real estate investment trust since 1993, would get about $11.9 million, according to data compiled by Bloomberg. His brother, President Edward Coppola, would receive $9.55 million. The two also own shares in the firm worth about $165 million and $118 million, respectively, as of Monday’s market close.

Chief Financial Officer Thomas O’Hern and Chief Operating Officer Robert Perlmutter would get about $5.5 million each.

Gross-Ups

The packages pale in comparison to earlier employment agreements. For example, Edward Coppola and O’Hern would have received severance of $60.9 million and $31.6 million, respectively, if a deal had happened by the end of 2014, a filing shows. The amounts included gross-ups to cover the executives’ taxes.

Perlmutter wasn’t eligible for severance at the time and Arthur Coppola had voluntarily given up the right to such benefits in 2013 “to eliminate all change of control gross-ups consistent with good corporate-governance practices,” the company said in a May 2015 filing. That followed investor criticism of a provision that required Macerich to cover excise taxes on parachute payments.

Thomas Leanse, the firm’s legal chief, still has an agreement with terms resembling the new severance policy, entitling him to about $6 million if his employment is terminated following an acquisition.

Activist Pressure

Activist investors targeted Macerich after it rejected Simon’s offer and sought to adopt a so-called poison-pill provision and stagger the terms of its board members. It scrapped those plans after shareholders complained and instead added two independent directors.

Shares of Macerich had slumped as much as 26 percent this year, bottoming out at $52.72 on Sept. 22 and creating an opportunity for activists. Dan Loeb’s Third Point disclosed earlier this month that it took a position during the third quarter and is expected to push for changes, which could include a potential sale, people familiar with the matter have said. Starboard Value, run by Jeff Smith, also reported a stake.

The stock has surged about 17 percent since Nov. 3, when Macerich posted its quarterly regulatory filing, which included the new severance agreements.

The mall operator owns 54 million square feet (5 million square meters) of real estate in the U.S., primarily in 48 regional shopping centers, according to its website.

To contact the reporters on this story: Lily Katz in New York at [email protected] ;Anders Melin in New York at [email protected] To contact the editors responsible for this story: Arie Shapira at [email protected] Peter Eichenbaum, Daniel Taub

2017 Bloomberg L.P

TAGS: Retail
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