Marconi directors and staff take £13m share bonanza

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The Independent Online

The directors and staff of Marconi yesterday enjoyed a £13m shares-and-options bonanza more than a year after the telecoms equipment maker was brought back from the brink of collapse.

The directors and staff of Marconi yesterday enjoyed a £13m shares-and-options bonanza more than a year after the telecoms equipment maker was brought back from the brink of collapse.

The company re-listed on the stock market in May last year after being suspended pending the outcome of a huge refinancing process that saw the company's original shareholders wiped out and its lenders write off £4bn of debt.

Following the restructuring, Mike Parton, who became chief executive in 2001, was granted nil-priced options under a management incentive scheme that became exercisable for the first time yesterday.

As a result, the company announced yesterday that Mr Parton had decided to exercise 840,000 options at 590p that brought him £5m. Mike Donovan, the chief operating officer, netted £3m from selling 532,800 shares. The company's chairman, John Devaney, also exercised options worth £500,000.

But in a Stock Exchange statement, Marconi stressed that the directors would not be exercising all their options and shares entitlements and would keep enough "to build a meaningful long-term stake" in the business on a voluntary basis.

After yesterday, Mr Parton retained a package of 210,000 options from those that could have been exercised, leaving him another 2,450,000 options yet to be exercised.

Other members of staff also exercised options yesterday which totalled 2.2 million shares at 590p. The shares were all placed in the market by Cazenove. The management's share options were awarded under a complex incentive plan which saw them awarded five tranches of options that would become exercisable on the achievement of certain performance targets that also had to be met within certain strict time.

The company was refloated with new debt of £750m but the banks demanded this was repaid early and also imposed targets for increasing the company's market value.

The company was able to announce yesterday that it would complete the repayment of the new debt by 1 September. Since it refloated, Marconi's share price has surged, increasing its market capitalisation from £500m to £1.2bn. It closed at 584.5p yesterday, down 15.5p.

Of the five tranches of options granted, the first three were related to debt repayment and the fourth was triggered when its market value surpassed £1bn. The final tranche will be awarded when the Marconi market capitalisation reaches £1.5bn.

Peter Hickson, chairman of the remuneration committee, said: "The chairman, executive directors and I have agreed that it is appropriate for them to retain, on a voluntary basis, sufficient of their available options to build a meaningful long-term stake in the business."

News of the payouts will make grim reading for those previous Marconi shareholders who lost everything. At the time of the reconstruction, the original lending banks took equity in what became the new Marconi Corporation but the old shareholders were left with nothing. The company had been brought to its knees following a disastrous acquisition spree during the technology boom years under the management team of of Lord Simpson, who was chief executive, and John Mayo, the then finance director.

Marconi's collapse proved to be an ignominious final chapter to GEC, the once-proud industrial empire that was famous for maintaining a huge cash pile. It was split up leaving Marconi as its successor.

At its peak during the technology bubble, Marconi was worth £35bn but was subsequently forced into a rapid disposal programme and shed more than 6,000 jobs in an attempt to stay in business as the slump took a hold.

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