Aramark CEO Gets $1B Reward From Buyout

The first time Joseph Neubauer took Aramark Corp. private in 1984, the deal was worth $889 million. When he and other managers led a leveraged buyout of the nation's largest food services company a second time, the price tag zoomed to $6.24 billion.

And the biggest winner among shareholders at Aramark, which Friday completed its first week as a newly private company? Neubauer and his family, whose holdings soared in value to almost $1 billion.

That puts Neubauer, 65, who came to the United States from Israel alone at the age of 14 and said he learned English from John

Wayne movies, near the top of the list of beneficiaries from a wave of LBOs that have swept corporate America in the last year.

As the number of buyouts rises, along with the popularity of companies being "flipped" back to public ownership by their private buyers, the role of top executives in those deals is drawing increased scrutiny and criticism from regulators and lawmakers in Washington, governance experts and shareholder groups.

The Aramark sale, however, flew mostly under the radar. Shareholder complaints focused on the price offered, not how the buyout enriched Neubauer. Still, the sums he pocketed are remarkable.

What also makes him stand out among billionaire CEOs is the amount of risk that Neubauer, who was hired in 1979 as Aramark's chief financial officer, was willing to assume. He amassed his holdings by cashing in stock options and using millions in borrowed funds to buy shares at prices as low as 27 cents each. Stock splits multiplied his shares. His stake grew with the help of a board so friendly to him, it established a scholarship in his name at his alma mater.

"He has holdings you would associate with a founding CEO _ and very few founding CEOs," said Brian T. Foley, an independent compensation consultant based in White Plains, N.Y. "You also have to remember, he's been there a long time....It's almost refreshing."

Aramark did not return repeated phone calls for this story, which is based on an examination by The Associated Press of Securities and Exchange Commission filings, public documents and estimates from compensation consultants. A message left with Neubauer's office was not returned.

Aramark makes most of its money running cafeterias and hot dog stands everywhere from Shea Stadium in New York to Indiana state prisons. Sales grew from $7.4 billion in fiscal 2001, when the company had its last initial public offering at $23 a share, to $11.6 billion in fiscal 2006.

But earnings growth has been choppy and the stock was a bit of a dud, never rising much above $30 a share.

That provided an opening for Neubauer and his financial partners from Goldman Sachs, JP Morgan Chase and three buyout funds. After initially offering $32 per share, they bumped the payout to $33.80 per share in cash, enough to win over shareholders.