By Joe Rockett
The Court of Chancery of Delaware held David Murdock, the CEO of Dole Food Co., Inc., and Dole's COO, Michael Carter, liable to shareholders for $148MM for fraud in a going private merger transaction. The case was decided August 27, 2015. The Court found that Messrs. Murdock and Carter took certain steps that depressed the stock price of Dole, allowing Mr. Murdock to cash out the public shareholders at a price favorable to Mr. Murdock, the surviving shareholder.
The transaction was dressed in fiduciary trappings giving the appearance of shareholder-protective measures. While a committee of disinterested and independent directors was appointed and such committee had the benefit of seasoned legal counsel and a reputable financial advisor, Murdock and Carter, according to the Court, prevented the committee from fulfilling its responsibility by withholding critically important information from the committee.
Vice Chancellor Laster's opinion discusses in great detail the various machinations by Murdock and Carter to drive down the price of the stock and withhold key information from the committee members and Board of Directors. One example of the executive suite shenanigans revealed Carter conducting a very private lenders’ meeting, giving the prospective financers of the going private transaction the positive story of proposed acquisitions of profitable farms to boost earnings, while withholding such information from the independent directors committee and causing it to focus on the low-end conservative projections.
The opinion is instructive for any management team, Board of Directors or independent committee considering taking a company private and having to deal with a controlling and self-interested CEO.
The case is a consolidation of a breach of fiduciary duty class action and a dissenting shareholders appraisal action. See In Re Dole Food Co., Inc., Consolidated C.A. No. 8703-VCL and C.A. No. 9079-VCL.
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Posted on Tue, September 1, 2015
by Andrews Davis filed under