LTIP share options. Company is bought. What happens?

[Luca Brazzi]

Scenario:

You have just been granted shares in your current company (PLC) that vest in 3 years' time.
Private equity company buys the PLC.

What are the options for what might happen to the LTIP shares?

Thanks :-)
LB

[LooneyTunes]

Depends on how the LTIP was structured (there have been many ways to do this even in the past few years) and the terms associated with them.

There's a chance you could find that there are vesting acceleration clauses built in to the scheme that kick in on a change of control event. If you're lucky your in house accountants will also be in the scheme and all over the tax treatment!

[anonymous-user]

Yes, it'll be covered somewhere in the scheme rules. Could be early vesting, could be roll-over into shares of the purchaser. Roll-over is fairly likely as it achieves the LTIP objective of locking executives into the company.

[Luca Brazzi]

Great stuff. Thanks for this. The purchaser is a US company listed on the NYSE, buying a UK PLC.

Let’s see what happens. In the meantime, we'll look at the scheme wording.
Thanks again.

[NickCQ]

Purchaser should be putting out a Rule 2.4 / 2.7 announcement under Takeover Code rules, that will have some commentary on treatment. How does the offer price compare to the payout thresholds?

[Luca Brazzi]

Thanks for that. Will look for the announcements. Not sure of offer price vs thresholds.
Offer price was 21% above share price when the offer was made.

[LooneyTunes]

Luca Brazzi said:

Offer price was 21% above share price when the offer was made.

That’s potentially, but hopefully not, irrelevant.

You need to check whether you’ve been give shares or options and what (if any) conditions there are linked to them. There are lots of ways to structure these things and they look different company to company. Only the scheme docs will tell you.

Tax treatment can be quite different depending on how it’s been done so well worth looking into and taking advice.

If you’re really lucky you’ll be able to cash in and the new owners will want to reincentivise you further.

[NickCQ]

Assuming it's Blackstone / St Modwen, it's a 2.4 announcement:
https://polaris.brighterir.com/public/st_modwen/ne...

That's not a final offer, but it triggers 30 days "put up or shut up" - Blackstone has to make a formal offer (2.7) within 30 days or walk away if diligence is not good or they think they won't get the votes at a price that makes sense.

Nothing disclosed about the LTIPs yet. From the annual report it looks like the 2020 PSP is split 50/50 between relative total shareholder return and accounting total return, so no share price threshold as such. If they are merging the business into their existing Mileway logistics platform clearly some of the top management will need to be (golden) parachuted out.

[Luca Brazzi]

Good assumption.
Will see what happens.
Thanks all for the information and wisdom.