US court punishes controlling shareholder for undervaluing the company in its buyout

The Delaware Court Judge Travis Laster, in the USA, decided that Mr. David Murdock, CEO and controlling shareholder of Dole – one of the world’s largest sellers of fresh fruit – fraudulently drove down the company’s stock price in a buyout operation carried out in 2013. The billionaire Mr. Murdock and the then CCO Mr. Michael Carter, will have to reimburse other shareholders $148 million. That is one of the largest amounts awarded in a lawsuit tied to a merger in the United States.
The 2013 buyout valued Dole at $13.50 a share. Yet the opinion effectively determined that the company was actually worth $ 16.24 a share at that time –  and Laster said he was taking a conservative view of the valuation.
According to the decision, the price paid by Mr. Murdock was derived through unfair manipulation. He initially offered $ 12 a share, which the independent committee eventually negotiated up to $13.50 a share. Yet even before Mr. Murdock made his bid, Mr. Carter misstated how much Dole could earn by selling some of its businesses, in addition to having cancelled a stock buyback program. These facts drove down the company’s stock price.
After that, Mr. Murdock provided the committee with one set of artificially low management projections while giving potential lender to the takeover bid different, more accurate numbers. The independent committee voted unanimously to support the takeover bid, but the company’s remaining shareholders barely approved the deal.
Lawsuits involving appraisal reports have been more and more frequent, but they are rarely submitted for consideration by the Court.
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