Chancery finds financial advisor’s merger work close to perfection but no cigar

In re Dole Food Co., 2015 Del. Ch. LEXIS 223 (Aug. 27, 2015)

The Delaware Court of Chancery recently found much to praise in the comportment of the banker serving as financial advisor in the highly contested Dole Food take-private merger. It noted the advisor’s integrity throughout the problematic negotiations and its “thorough and balanced work product.” But the court found that the defendants’ fraud made a reliable valuation impossible.

The defendants were David H. Murdock and C. Michael Carter. The plaintiffs were shareholders challenging the way in which Murdoch, with critical help from Carter, managed to reacquire complete control of the company after it went public in 2009. Prior to the merger, Murdock owned about 40% of Dole Food Co. common stock.

Although an independent committee and financial advisor evaluated Murdock’s offer, Murdock and Carter succeeded in defeating any efforts to ensure a fair process and outcome for the minority shareholders, the Chancery found.

Carter’s manipulation of the financial information management provided to the financial advisor for its valuation of the company was a particularly egregious example of the fraud but not the only one, the court found. Initially, Carter developed projections with “falsely low numbers.” When the financial advisor realized that these forecasts did not accurately reflect the company’s value and created his own projections, he withheld vital information about anticipated cost savings and anticipated value resulting from other initiatives that would increase the company’s value.

Fraud “tainted both the negotiation process and [the financial advisor’s] work product,” the court said.

Find out more about its damages ruling in favor of the plaintiffs here.