ED MEYER GETS $87 MILLION GOLDEN PARACHUTE

WPP's Takeover Also Gives Him $351 Million in Stock & Options

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NEW YORK (AdAge.com) -- Ed Meyer got the ultimate golden parachute: Grey Global Group will pay its chairman-CEO as much as $87 million cash when WPP Group buys Grey. And Mr. Meyer gets to keep his job.

The cash payments don't include Mr. Meyer's Grey stock and stock options, worth about $351 million based on this morning's valuation.

As for the cash, Grey will pay Mr. Meyer $51.8 million -- based on June 30 values -- for "deferred compensation and supplemental pension" that he racked up over the past decade, according to a Securities and Exchange Commission regulatory filing WPP Group made late Sept. 25.

Settlement payment
Mr. Meyer also gets $22.7 million as a

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"settlement payment" to trade his old contract for a new one -- and an additional $12.4 million for "golden parachute excise taxes" if the merger closes this year.

WPP expects to complete its takeover of Grey in December or January. If the deal closes this year, Mr. Meyer collects about $86.9 million cash. If it closes in 2005, he gets about $74.5 million.

Mr. Meyer had a big incentive to sell Grey this year. Under his old contract, he could collect severance of $22.7 million plus $12.4 million for taxes if he terminated employment in 2004 after a "change of control." He'd only get $9 million if he sold Grey next year, according to the filing. (Under his deal with WPP, Mr. Meyer will get the 2004 severance pay even though he's not leaving.)

Takes a pay cut
Mr. Meyer did give up something. He signed a deal with WPP to run Grey through December 2006 for a base salary of $1 million a year -- down from his old $3.65 million salary. (He'll also get as much as $3 million in stock options, bonuses and incentive pay.)

The old contract allowed Mr. Meyer to pull a golden parachute if there was a change in control. As it happens, he was the one key shareholder who could decide whether there would be a change in control.

Mr. Meyer, 77, was in an enviable position. With his stock plus trusts and stock plans that he oversaw, he had control of 70% of voting shares in 2003 and, as filings earlier this year noted, the ability to elect all board members and to "exercise significant influence over our business and affairs," including "any determination with respect to mergers."

Meeting with bankers
Indeed, this week's filing shows Mr. Meyer began talking with investment bankers about a potential deal last February -- two months before he told board members what was going on. In February, Grey management contacted Goldman, Sachs & Co. and J.P. Morgan Securities "to assist Grey in considering its financial alternatives," according to the filing. In February and March, the bankers met with Mr. Meyer and Grey's vice chairman and chief financial officer, Steven Felsher. In March and April, Grey and Goldman Sachs began to compile a list of prospective buyers to be contacted by Goldman Sachs regarding their interest in a potential acquisition.

Finally, in April, Grey management discussed with board members "the possibility of a business combination transaction involving Grey and the discussions that had taken place" with Goldman Sachs.

This was an eventful time for the company's tiny four-member board as Grey replaced two of its three outside directors in April and May. Mr. Meyer is the fourth director.

During April and May, Goldman Sachs contacted potential suitors. Grey formally hired Goldman Sachs and J.P. Morgan in June. Grey is paying Goldman Sachs about 1% of the sale price -- about $14 million -- plus expenses; J.P. Morgan's pay isn't yet set.

From April through July, the filing said, the bankers approached 21 potential bidders; 15 signed confidentiality agreements; 10 were given access to a data room to scope Grey's financials.

In the end, only three bid: WPP; private-equity firm Hellman & Friedman, identified in the filing as "Company X"; and French ad firm Havas, identified as "Company Y."

The start of bidding
WPP's first preliminary proposal, on July 1, called for WPP to buy at least 75% of Grey shares for WPP stock and pay for the rest in cash. Hellman & Friedman made its first preliminary offer July 19, proposing to buy Grey for 100% cash. On July 26, Havas formally expressed interest, proposing a 100% cash acquisition financed by borrowings and stock.

Grey's board Aug. 11 gave WPP a revised merger proposal in which WPP would buy 55% of Grey shares for cash and 45% for WPP stock.

Goldman Sachs Aug. 26 gave suitors a final deadline for bids: Sept. 8, two days after Labor Day. The three bids came on deadline day. WPP formally proposed to buy 65% of Grey shares for WPP stock and the rest for cash with a bid it valued at $955 a Grey share. Hellman & Friedman entered an all-cash offer; Havas made a lower all-cash bid.

Grey's board met Sept. 9 to discuss the bids. Advantage at this point appears to have steered to Hellman & Friedman; the board asked the bankers to pursue talks with the private-equity firm.

But later that day, WPP made its move, telling Grey's advisers it would raise its bid and make it an even cash/stock deal. WPP representatives met with Grey's management, bankers and attorneys that evening to hash out details. WPP rejected Grey's proposal to put a "collar" on the deal that would protect Grey shareholders if WPP's stock fell before the deal closed. Grey's board met again Sept. 10 and set a meeting for the next day to make a deal. Goldman Sachs told the three suitors to submit their best and final bids.

Grey's weekend board meeting
Right before Grey's board convened at 9:30 a.m. on Saturday, Sept. 11, WPP proposed to buy Grey for a package -- half cash, half stock -- initially valued at $1,005 a share (but subject to fluctuations in WPP's stock price). Hellman & Friedman offered a cash bid below WPP's offer (though without the risk of WPP's fluctuating stock). Havas stayed with its Sept. 8 bid.

Grey's board weighed the offers. The three outside directors, in executive session, concluded WPP's bid was "the superior financial alternative," according to the filing. At 6 p.m., Grey's board approved the deal and a new employment agreement for Mr. Meyer. Grey committed to complete the deal or pay WPP a termination fee of $56 million. WPP's finance director, Paul Richardson, signed the papers that evening.

On Sept. 13, WPP announced it would buy Grey for $1,005 a share or $1.52 billion. Mr. Meyer turned Grey into gold.

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