You’ve probably never heard of Triarc, But if you’ve scarred down an Arby’s sandwich or guzzled a Royal Crown cola, you’ve done business with Triarc, which also owns big propane and textile operations. Triarc is run by Nelson Peltz and Peter May, who took control in 1993 from Victor Posner, a notorious corporate carnivore. Posner was being forced out of the company by a federal judge for various misdeeds, and has since been forbidden to control any public company, thanks to an action brought by the Securities and Exchange Commission.
Peltz and May paid Posner $72 million for a controlling 20 percent stake in Triarc. They could write such a big cheek because they made zillions in the junk-bond-crazed 1980s. They used junk bonds to build Triangle Industries into the country’s biggest can company, and got $8.34 million when they sold Triangle in 1988. The two men, who started as small-time dealsters and worked their way to the big leagues with skill, luck and the help of fallen junk-bond king Michael Milken, seemed to constantly increase their stake in various public companies they controlled at the expense of other holders. The grand finale: the two amigos providentially increased their Triangle ownership to 62 percent from 13 percent shortly before a fat takeover offer surfaced. Peltz, May and the buyer paid $75 million to settle the ensuing shareholder suits; they didn’t admit wrongdoing.
Owning 6 million shares-20 percent of Triarc –wasn’t enough for Peltz and May. They had Triarc give them options on 1 million more shares the day after the Posner deal closed, then got options on an additional 125,000 shares. Last spring, with shareholder approval, Peltz and May got options on a whopping 8.5 million shares, about 10 percent of Triarc. In return, they gave up cash salary, bonus and long-term compensation for six years. Options have economic value even though they don’t cost the company any cash. Triarc valued the 3.5 million options at $32 million, and the other options at $11.6 million. Even in these days of corporate excess, $43 million is a good year’s haul for two guys.
But Peltz and May aren’t done. Materials for last month’s stockholder meeting show that in November, Peltz and May got 400,000 more options, valued at about $2.5 million. Given that they own 20 percent of Triarc outright and would own more than 30 percent if they exercised their existing options, why give them options for an additional 1 percent of the company? How much incentive do they need? “You shouldn’t penalize Nelson and Peter for having written a $72 million cheek and buying 20 percent of the company outright,” argues Leon Kalvaria, Triarc’s vice chairman. “They have a huge amount of money at risk, unlike most corporate executives. They’re getting only $1 a year in cash compensation. When they got the large grant of options last year, they never said they weren’t going to get more options.” It still seems piggy to me.
Triarc’s board, which approved the options, has been hiring the trough pretty good, too. The board has tripled its own options, to 8,000 a year from 1,000. And directors now get 15,000 options when they join the board, up from 3,000. Existing directors get 12,000 make-up options. What a bunch of oinkers.
It’s not easy, but Bell Sports Corp., the nation’s biggest maker of bicycle helmets, makes Peltz and May look like saints. Bell stock has fallen by two thirds since late 1993, making many Bell options worthless. Guess what? Under a little-noted provision of Bell’s pending purchase of the nation’s No. 2 helmet maker, American Recreation, Bell will reduce the exercise price of its options to $13.87 from prices as high as $42.37. The execs would also get a pay raise. Good heavens. What will they get ff the stock goes
Bell declined to comment until after a shareholder vote Tuesday. The deal will probably go through despite opposition from Bell’s biggest holder, the Zell/Chilmark Fund. Oh, well. If Arby’s opts to introduce a pig sandwich, it can use Triarc and Bell as raw material.
