Dive Brief:
- Dole Food Co. CEO David Murdock and his longtime lieutenant, Michael Carter, must pay Dole shareholders $148 million over a dispute concerning the 2013 company buyout, per a Delaware judge's ruling. This is one of the largest awards to shareholders in this type of lawsuit.
- The final award came to about $2.74 per share, which was the difference between the share buyout price and the actual value of the company at that time. Shareholders, however, were originally looking for much more, $25 per share, as they felt Dole's assets warranted more.
- According to the judge, Carter "deliberately drove down Dole’s stock price to allow Mr. Murdock to buy the company more cheaply, then created lowball financial projections to support the $13.50-a-share buyout price," says The Wall Street Journal.
Dive Insight:
In recent years, cases where stockholders sue companies over deals are becoming increasingly common. Though lawsuits already followed 44% of deals in 2007, that number jumped to 93% of deals in 2014, according to Cornerstone Research. These deals are often settled quickly, however, with companies divulging more information about the deal or board meetings as well as paying the plaintiffs’ lawyers a fee.
This includes appraisal lawsuits, which are legal in Delaware but have caused controversy among corporate executives and advisors. "Dole was particularly upset about hedge funds that had bought shares on the eve of the company’s buyout for the purposes of pressing for a higher price in court," according to The Wall Street Journal.
In 2014, these lawsuits set a record at 40, and already this year, 38 lawsuits have been valued at $2.1 billion in face value. Court filings said this is compared to only $129 million three years ago.