CyrusOne today announced that it is undertaking a separation with Bruce Duncan, the company’s President and Chief Executive Officer (CEO), and he will resign as a board member, effective immediately following the filing of CyrusOne’s 10-Q financials for the quarter ended June 30, 2021.

CyrusOne’s Board of Directors has appointed David Ferdman, currently a member of the Board, to serve as the company’s President and Chief Executive Officer on an interim basis. Subsequently, CyrusOne’s Board of Directors will undertake a search to identify the company’s next President and Chief Executive Officer. Ferdman will serve until this successor is identified and will remain a member of the company’s Board of Directors.

Below we provide i) context on Bruce Duncan’s tenure, ii) details on his separation payments and benefits, which amount to over $16m based on Dgtl Infra estimates, and iii) background on David Ferdman, CyrusOne’s interim CEO.

CyrusOne – Bruce Duncan Resigns – Context

Bruce Duncan only became the President & Chief Executive Officer of CyrusOne on July 6, 2020, meaning that the executive’s tenure at the company lasted slightly more than one year. Similarly, Katherine Motlagh, CyrusOne’s Chief Financial Officer only joined the company on October 30, 2020, or just 9 months ago.

During CyrusOne’s Investor Day in June 2021, the company held a particularly disappointing question & answer session with investors. Indeed, one participant posed a particularly pointed question, which CyrusOne’s Bruce Duncan read aloud:

The Board acted in a highly opaque and cavalier fashion in firing the prior CEO. Can you please have the lead director directly address shareholders and explain the reasons for Gary’s firing when most shareholders trusted his team and ability to execute?

CyrusOne Investor Day – June 16, 2021 – Time Stamp: 2:27:35

This investor was referring to CyrusOne’s former CEO, Gary Wojtaszek, who preceded Bruce Duncan. Ultimately, these types of questions reflected disappointed investor sentiment towards CyrusOne’s recent performance.

Separation Payments and Benefits – CyrusOne, Bruce Duncan

CyrusOne and Bruce Duncan’s Separation Agreement states that the executive is departing for reasons “other than for cause” under his employment agreement. In exchange, for a release of any claims against the company, Bruce Duncan will receive payments and benefits from CyrusOne. Specifically, these payments and benefits will include the following, as well as other smaller payments:

  • Severance: $4,250,000 in a single lump sum cash payment. Indeed, this represents two times Bruce Duncan’s i) annual base salary and ii) annual bonus target
  • Prorated Bonus for Remainder of 2021: $733,562 (actual amount paid to be based on performance)
  • Equity Awards: all of Bruce Duncan’s outstanding equity awards previously issued by CyrusOne will vest. Dgtl Infra estimates that these equity awards are worth $11.1m (see below for detail)

Equity Awards – Detail

The below calculations assume that Bruce Duncan’s Termination Date is on July 29, 2021. Additionally, the calculations assume CyrusOne’s latest closing stock price of $74.56 on July 28, 2021.

Time-Based Awards

  • Sign-On Restricted Stock (2020): 44.2k shares will vest, which equates to a value of $3.3m
  • Restricted Stock (2020): 8.7k shares will vest, which equates to a value of $648k
  • LTIP Units (2021): 10.1k units will vest, which equates to a value of $754k

In aggregate, Bruce Duncan’s Time-Based Awards amount to $4.7m in value, based on CyrusOne’s latest closing stock price of $74.56.

Performance-Based Awards

  • Performance Units (2020): 58.1k units will vest, which equates to a value of $4.3m
  • Performance Units (2021): 28.2k units will vest, which equates to a value of $2.1m

In aggregate, Bruce Duncan’s Performance-Based Awards amount to $6.4m in value, based on CyrusOne’s latest closing stock price of $74.56. Note that these figures represent the maximum additional shares that are eligible to vest for Bruce Duncan.

Summary – Separation Payments and Benefits

Overall, Dgtl Infra estimates that Bruce Duncan stands to earn $16.1m from a combination of severance, a prorated bonus, and the immediate vesting of his time- and performance-based equity awards.

Who is David Ferdman, CyrusOne’s Interim CEO?

With Bruce Duncan’s decision to resign from CyrusOne, David Ferdman becomes the company’s President and Chief Executive Officer on an interim basis.

David Ferdman, age 54, has been a CyrusOne director since 2013. He most recently served as a Managing Partner of DTB Capital Partners, a Texas-based private investment firm with a focus on the telecom, freight logistics, data center, aviation, and real estate industries. Ferdman also serves as the CEO of Cybraics, a Florida-based advanced detection cybersecurity company.

Notably, Ferdman was a co-founder of CyrusOne and served as President and Chief Executive Officer from 2000 until June 2010. Upon consummation of CyrusOne’s initial public offering (IPO) in 2010, Ferdman resigned from his employment with the company.

Mary Zhang covers Data Centers for Dgtl Infra, including Equinix (NASDAQ: EQIX), Digital Realty (NYSE: DLR), CyrusOne (NASDAQ: CONE), and CoreSite Realty (NYSE: COR). Within Data Centers, Mary focuses on the sub-sectors of hyperscale, enterprise / colocation, cloud service providers, and edge computing.

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