See text below.
EXCERPTS
The founder of child-care group ABC Learning Centres has moved to restore his grip on the company he almost lost, through a deal to buy back as much as 1.5% of the company.
The deal, announced after the market closed yesterday, allows Eddy Groves and wife Le Neve to turn their paltry holding of just 3186 shares, worth $2692, into 8.3 million shares by this time next year, provided they can improve the performance of the business.
It allows them to sacrifice nearly 90% of their pre-tax salaries for the current financial year in return for options to buy shares. At the height of their success, the pair owned a stake in the company worth $325 million, but almost all of this was lost in February and
...
Mr Groves has chosen to sacrifice his entire $1.6 million salary but Le Neve will sacrifice just half of her $600,000 pay.
Mr Groves' salary for 2008-09 is more than double the $697,000 he received last year, after the boosted salary was approved by shareholders in November.
Mr Groves is essentially electing to take all his pay in the form of ABC shares, at an option price of 23¢ a share. Mrs Groves will only take half.
The shares have no performance targets and will be "in the money" after July 1 next year if the share price passes $1.15.
The deal is potentially lucrative for the Groves: at $2, Mr Groves' options would net him a profit of $5.9 million. At the same price, Mrs Groves would make a $1.2 million profit.
The swap into shares without performance targets is based on an argument Mr Groves is forgoing a cash salary for the options.
Despite the fact the announcement was made after the close yesterday, the shares were heavily sold off after midday, closing down 15.5¢ at 84.5¢.
Under the deal, Mr Groves will take up 6.9 million of the total of 8.3 million shares on offer.
Mr Groves' deal is struck after his existing entitlement to 308,880 options are virtually worthless, with a strike price of $5.18.
The company's downfall was triggered in February by a poor half-year result that had slumped more than 40%.
The falling share price triggered banks to call in loans they had made to the Groves and other directors.
- reprinted from The Age