Oracle's proposed deal to buy health IT giant Cerner could be a big score for Cerner's C-suite and former CEO.
Four top executives, including former Cerner CEO Brent Shafer, have golden parachutes ranging from $10 million to almost $22 million if they are forced out in the Oracle acquisition, Cerner disclosed in a 171-page filing with the U.S. Securities and Exchange Commission (SEC) on Jan. 19.
The amounts are estimates, assuming that the sale goes through and that they either are terminated without cause or leave for “good reason.” The payouts value Cerner stock at the $95-a-share price Oracle offered in the proposed deal.
In late December, Austin, Texas-based Oracle announced plans to buy the electronic medical records firm in a deal valued at $28.3 billion, one of the software company’s biggest acquisitions ever and one of the largest takeovers in 2021. The deal is expected to close this year, pending shareholder and regulatory approval.
At the top of the pile, CEO David Feinberg, M.D., who took the reins as CEO just four months ago in August, would net nearly $22 million, which includes $4.5 million in cash, equity awards worth $17.4 million and more than $23 million benefits and perks.
Feinberg, a physician and psychiatrist by training, jumped to Cerner after spending two years as vice president of Google Health, where he led Google’s worldwide health efforts, bringing together groups from across Google and Alphabet that used artificial intelligence, product expertise and hardware to tackle some of healthcare’s biggest challenges. At Google Health, Feinberg was responsible for organizing and innovating Google's various healthcare initiatives.
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The golden parachute estimates outlined in the SEC filing take into account agreements by Feinberg and Jerome Labat, executive vice president and chief technology officer, who both waived rights to payments if they voluntarily leave the company within a year of a sale’s close, as documented in a separate SEC filing.
Shafer, who led the company for three years, also has one of the shiniest golden parachutes, with a total of nearly $21 million, due to an agreement to help with the transition through Oct. 1. That total includes $4 million cash, equity awards worth $16.5 million and more than $16 million in benefits and perks.
Marc Erceg, Cerner's chief financial officer who joined in February 2021, has a potential haul of $11.3 million, and Labat stands to receive about $11 million.
Cerner turned down takeover effort before Oracle deal
The SEC filing also offers a timeline of Oracle's acquisition, including details of how the deal came together and another takeover offer that occurred months before.
In July 2021, Cerner leaders were approached by a private equity firm interested in discussing a potential acquisition. The firm was not identified in the filing.
The chairman of Cerner's board and management told the firm they were focused on hiring a new CEO and pursuing a "standalone strategy," according to the filing.
In August, the private equity firm tried again, and Cerner also rebuffed that offer.
Ten days later, Cerner announced Feinberg's hiring as the new CEO. He started his position on Oct. 1.
Oracle entered the picture just six days later. Management at the software company reached out to Cerner to discuss "possible partnerships and other areas of potential tactical or strategic collaboration" between the companies, according to the filing. The next day, Oracle leadership told Cerner the company was interested in an acquisition.
Oracle and Cerner then held several meetings over video conference in early October, at which time Cerner brought in lawyers from Latham and Watkins to advise. Later that month, the two companies entered into a nondisclosure agreement as discussions continued.
Oracle made a $92-per-share acquisition offer on Nov. 12, representing a 23.3% premium to the then-current share price and approximately a 10.4% premium to Cerner’s 52-week high trading price.
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As Cerner’s board talked about the terms of Oracle's initial offer, they also considered other strategic alternatives including future prospects as a stand-alone company and the possibility of contacting other potential buyers, including the private equity firm.
However, board members expressed concern about long timelines, price uncertainty, the risk of information leaking out and losing Oracle as a potential buyer. They also express concern the deal size could necessitate a consortium of private equity buyers, increasing the complexity of the sale process.
On Nov. 24, Cerner told Oracle its $92 per-share offer was too low, and the company's board indicated it wanted a share price in the upper $90s.
Oracle then countered on Dec. 1, offering $95 per share, indicating it was the company's "best and final offer."
On Dec. 16, The Wall Street Journal broke the news that Cerner was in discussions to be acquired by Oracle, but no other potential bidders expressed interest.
Early in the morning of Dec. 20, Cerner's board held another meeting and ultimately approved the agreement.
Under terms of the merger agreement, Cerner can consider unsolicited better offers.