Most investors in spinoffs realize it is important to look into the reasoning behind the transaction. Is it a dump of bad assets? Regulatory pressures? If Tessera Technologies (TSRA) ends up executing a spinoff between now and March 2015, I can assure you it won’t take much detective work to uncover its CEO’s rationale: $$$$$.
Tessera’s board of directors recently unveiled a new 2012 compensation package for its President & CEO Robert Young which includes lucrative incentives for Mr. Young to execute a spinoff of one of the company’s businesses by 2015. Assuming Mr. Young can achieve that goal, he would benefit from the “immediate vesting of 550,000 stock options with an exercise price equal to the closing price of the Company’s common stock on Oct. 2, 2012.” At a closing price of $13.71 that day, Mr. Young’s haul would come out to a cool $7.5 million. Not bad at all, especially if one believes a spin could unlock value in the shares. Money always makes a good motivational tool.
The company had been a target of activist investor Starboard Value & Opportunity Fund earlier this year and as we highlighted, it also hired an adviser to explore its strategic alternatives ~18 months ago. This announcement only reinforces the idea that the company is highly motivated to get something done, however it is taking some time so one has to wonder if everyone inside the company is on board the idea. This move should add at least one more supporter though and I would expect to see some news from the company sometime in the next few years…
Disclosure: Author holds no position in any stock mentioned.