Summary: After downplaying Dole’s financial situation to drive down stock prices, CEO David Murdock was able to purchase the entire company and turn it back to a private company at the cost of the shareholders.
Dole Food Co Chief Executive David Murdock and the former Chief Operating Officer C. Michael Carter must pay $148.2 million back to shareholders. The 92-year-old billionaire and his top executive were found guilty of depressing the stock prices of the company before turning the company private two years ago.
Murdock and Carter were able to manipulate the prospects of the produce company to be so low that Murdock was able to buy the remaining 60 percent of the company that he didn’t already own at a lowball price. This undervalued price shortchanged shareholders, reducing the value of shares from $16.24 to $13.50 and allowing Murdock to purchase the company for $1.2 billion.
The ruling will pave the way for other managers wishing to buy their company. The award is one of the largest a class action lawsuit against companies that sell themselves for too low of a price has seen. Management buyouts are sticky situations that are hard to resolve and lead to convenient opportunities for management to manipulate their value.
While shareholders were hoping for a greater payment with hedge funds asking for Dole’s value to be appraised, they are still happy with what the judge gave.
Forbes has estimated Murdock to be worth $3.4 billion. His testimony during the trial made things worse for himself, painting the picture of him as this wealthy man that feels he is above everyone and accustomed to being privileged.
Source: http://www.reuters.com/article/2015/08/27/dole-buyout-idUSL1N1121A320150827
Photo: philanthropy.com