Less than four months into the job, the chief executive officer of Skye Resources Inc. is set for a $4.7-million payday if shareholders approve his company's merger deal with HudBay Minerals Inc.
Skye's Colin Benner, who took on the CEO role March 1, is entitled to a "transaction incentive," in the event of a takeover or merger "equal to 0.5 per cent of the net value of the transaction," according to filings with securities regulators.
Skye agreed Monday to a friendly, all-stock takeover offer from HudBay valued at about $460-million at the time the proposed deal was announced.
Including a private placement of 12.7 million Skye shares worth $95-million that HudBay has agreed to purchase as part of the deal, Mr. Benner will receive about $2.77-million for the "transaction incentive," which is part of his employment contract.
Mr. Benner, a former CEO of Lundin Mining Corp., is also entitled to a performance bonus totalling $2-million in options and cash "upon a merger or sale of the company at a price that represents an appropriate premium and creates value for shareholders," the documents show.
Skye director Terry Lyons, who heads the board's governance and compensation committee, said the incentives were necessary to attract an executive of Mr. Benner's calibre to the Vancouver-based company. It had languished on the auction block for nearly two years and was struggling to raise capital on its own because of dismal credit markets.
"We had no idea that things like this would develop in four months or four years. We put together a package to attract a very senior, very successful and very capable CEO that would have both the support of the board and our significant shareholders," Mr. Lyons said in an interview.
With about $840-million in cash on hand, and strong cash-flow from its zinc and copper production, HudBay has the financial might to fund Skye's $1.1-billion Fenix ferronickel project into production, which is targeted for 2011.
It will also have to pick up the tab for fees payable to four investment banks hired by Skye over the years to try and raise capital or find a buyer, as well as the incentive bonuses payable to Mr. Benner, who has agreed to join the HudBay board if the deal goes through.
This is not the first time that Mr. Benner has been compensated for a short stay in the executive suite. In early 2007, he was awarded a $2.2-million severance package after a 3-month stint as the CEO at Lundin. Before that, he was CEO at EuroZinc Mining Corp., which Lundin purchased for $1.8-billion in 2006.