Departing Cincinnati Bell execs get $11 million payday from CyrusOne offering

Phone company's data center IPO completed Jan. 18

CINCINNATI - The former Cincinnati Bell Inc. management team that led the spinoff of the phone company's data center unit into a freestanding public company last month received an $11.2 million payday when CyrusOne Inc. went public.

Securities filings for the Carollton, Tex.–based operator of 24 corporate data centers show the executives received cash payments for resigning their Cincinnati Bell jobs on Jan. 23. They also received restricted stock grants and the right to buy additional shares in the CyrusOne IPO, in which Cincinnati Bell sold 16.5 million shares at $19 apiece and retained a 69 percent stake in the company.

Gary Wojtaszek, who left his chief financial officer job at Cincinnati Bell to become president and CEO of CyrusOne in May 2011, received cash and stock worth $4.9 million in the IPO. That includes a restricted stock grant of 207,038 CyrusOne shares and a $450,815 cash payment for forfeiting incentive awards of stock he was eligible to receive at Cincinnati Bell.

Wojtaszek will have a base salary of $576,000 per year at CyrusOne, a 3 percent raise over his base pay at Cincinnati Bell in 2011, the last year for which phone company has reported annual compensation.

Also submitting Cincinnati Bell resignation letters were Kevin Timmons, who became CyrusOne's chief technology officer in October, 2011; Kimberly Sheehy, a former Cincinnati Bell vice president, who now serves as CyrusOne's CFO; and Michael Duckett, recruited to CyrusOne's chief operating officer post in October, 2011.

Timmons, Sheehy and Duckett each received cash payments and stock awards worth $2.1 million, based on CyrusOne's closing price of $21.08 on Jan. 30.

Those arrangements seem reasonable to Ron Bates, managing director at Legg Mason Investment Counsel downtown. Bates is director of the firm's Socially Responsive Investment Team, which considers strong corporate governance among its investment criteria.

"The numbers don't seem too alarming," he said. "Given the size of the offering and what the team has done to build it, it doesn't seem out of the ordinary."

Bates said the payments should help CyrusOne retain management talent in a rapidly-growing industry where top managers can readily find new opportunities.

"That team has been very successful," he said. "They need to retain that talent."

The CyrusOne IPO was described as "highly successful" by Cincinnati Bell Chairman Phil Cox, in a press release announcing Jack Cassidy's departure as CEO this week. Cassidy was elected vice chairman of Cincinnati Bell's board and was replaced as CEO by Ted Torbeck. Cassidy is a CyrusOne director who received 10,790 shares in the offering and purchased another 50,000 at the offering price of $19 per share. The stock is now worth $1.2 million.

The offering ended a two-year investment in the data collocation company that began with Cincinnati Bell's $526 million purchase of CyrusOne in June, 2010. Cincinnati Bell made $264 million in capital investments in the last two years, bringing its total investment in the venture to roughly $791 million.

That investment is now worth at least $934 million, based on CyrusOne's Jan. 30 closing price. The Jan. 18 IPO was initially proposed at $16 to $18 per share, but went public at $19. The stock traded consistently higher in the weeks that followed.

As part of the transaction, CyrusOne used a November bond issue to pay off $480 million in "intercompany indebtedness." That should reduce Cincinnati Bell's long-term debt from its Sept. 30 level of $2.6 billion. That figure is $700 million higher than it was in March 2010, a few months before the CyrusOne purchase was announced.

 

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