Execs Strike Gold ; Commerce Severance Hiked Before $2.2B Sale

By JAY FITZGERALD

Commerce Group's top executives and directors are sitting on a goldmine worth more than $400 million as a result of Madrid-based Mapfre SA's surprise announcement that it's buying Massachusetts' largest auto and home insurance company for $2.2 billion.

Mapfre's offer to purchase Commerce shares for $36.70, an 18 percent premium over Tuesday's closing price, comes less than two months after Commerce directors' approved new severance packages, according to company filings. Those packages would triple the salaries of top executives and award them special stock grants if they resign for a "good reason or the company involuntarily terminates" their employment within three years of a sale of the company.

Though Mapfre has indicated it wants to retain top executives, the severance package would give Commerce chief executive Gerald Fels at least $5.7 million in cash and stock if he were to depart the company under terms of the severance package, according to company filings from last spring.

Other Commerce executives - including Arthur J. Remillard III, son of legendary Commerce founder Arthur J. Remillard Jr. - would also receive multimillion-dollar payouts if they leave.

And that doesn't include the stock they've compiled over the years at Commerce.

In all, 24 executives and directors at Commerce own about 18.9 percent of the company's outstanding shares - now valued at $415 million, based on Mapfre's recent takeover offer, according to the latest company filings.

A spokesman for Commerce declined comment on all matters pertaining to the deal.

Mapfre, which is trying to crack into the U.S. market with its purchase of Commerce, has indicated it plans to keep Commerce's headquarters in Webster with few, if any, layoffs of Commerce's more than 2,200 workers across the nation.

Meanwhile, other local insurers are bracing for intensified competition in Massachusetts as a result of the giant Mapfre's planned takeover of Commerce, with the deal expected to be completed by next spring.

Frank O'Brien, vice president at Property Casualty Insurers Association of America, said he sees Mapfre - which hasn't decided yet on whether to keep the Commerce name - becoming an even bigger player in Massachusetts, which is now deregulating its auto insurance system.

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Originally published by By JAY FITZGERALD.

(c) 2007 Boston Herald. Provided by ProQuest Information and Learning. All rights Reserved.