Valspar CEO could see $38 million payday from sale to Sherwin-Williams

Departing top executives of Valspar Corp. are in for a handsome payday following the company's sale to Sherwin-Williams next year, according to company filings with regulators Monday.

Minneapolis-based Valspar announced last month that it would sell to its longtime rival, Sherwin-Williams, in a deal valued at $11.3 billion. The merger is not expected to take place for about a year.

When it becomes final, a "change in control" scenario will prompt severance payments and benefits to Valspar's top executives who leave the combined company within two years, according to Monday's filing with the Securities and Exchange Commission.

According to the filing, Gary E. Hendrickson — Valspar CEO since June 2011 and Valspar president since 2008 — is expected to receive a severance of roughly $38.1 million in combined cash, equity and benefits. The bulk of Hendrickson's payment will be $30.3 million in stock options and restricted stock, with the rest being $7.7 million in cash severance and about $91,000 in insurance and outplacement services.

Other top executives to benefit from the severance policy include Chief Financial Officer James Muehlbauer, who is scheduled to receive roughly $11.1 million in combined cash, equity and benefits.

Valspar Executive Vice President and General Counsel Rolf Engh is slated to receive $5 million in combined compensation. And Howard Heckes, the president of Valspar's global coatings business, is slated to received $7.7 million. Lastly, Les Ireland, Valspar's president of consumer paints, is scheduled to receive $5.5 million.

The cash severance payments are equal to three times the base pay of Hendrickson and Muehlbauer and two times the base salary of the other executives, the filing said.

In announcing the deal last month, Sherwin-Williams officials insisted that they don't buy companies to gut them. But that has done little to resolve fears locally, where Valspar employs 600 workers in Minneapolis. About 400 are in the newly renovated headquarters and state of the art R & D labs that the company reopened about two years ago in the East Downtown area that sits right across from the new U.S. Bank Stadium.

"Minneapolis has watched Valspar grow into the great company it is today," said Minneapolis Mayor Betsy Hodges. "Sherwin-Williams has obviously recognized the tremendous value Valspar brings to the paint and coatings industry and we look forward to working with them to make sure that we retain as many jobs as possible and keep our top talent here in Minneapolis."

While locals fret losing another corporate headquarters, Wall Street has glowed over the deal, shooting both stocks near or past their 52-week highs in recent weeks.

Investors don't appear to be put off by several unknowns. For example, there is a concern that a Valspar, Sherwin-Williams union could prompt government antitrust concerns and trigger orders to sell overlapping businesses. Officials from both companies insist that is unlikely. However, their purchase agreement provides for that possibility. It states that Valspar's sale price could drop from the agreed upon $113 a share price to as low as $105 a share, should divestitures be ordered.

Valspar's stock fell 9 cents to close Monday at $106.95 a share, 76 cents shy of its 52-week high. Sherwin-Williams' stock rose 34 cents a share Monday to close at $296.77. That is $3.22 below its high for the year.