Fortress Wants More for Its
Dole Food Shares
It Is Among Large Investors Asking
for More Per Share After CEO Took Company Private
Nov. 22, 2013 2:31
Fortress Investment Group LLC is the mystery holder of about 2.8
million shares of Dole Food Co., according to people familiar with the
matter, and is one of at least three large investors asking a judge to
award them more per share than Dole's CEO paid to take the company
private earlier this month.
The people said Fortress is
the parent of Ripe Holdings LLC, which filed a lawsuit in Delaware
court last week demanding an appraisal of Dole Food shares. Fortress
is a publicly traded asset manager known mostly for distressed
lending, with about $58 billion in assets as of Sept. 30.
Hudson Bay Capital
Management LP, which owns 3.6 million Dole shares across two of its
funds, is suing alongside Fortress, according to a court filing. A
third hedge fund, Merion Capital LP, filed a separate claim for
appraisal of its 7.5 million shares, a court filing shows.
In all, holders of nearly
14 million shares, more than 25% of all Dole shares not owned before
the buyout by CEO David Murdock, are seeking more money in court. That
makes Dole's one of the largest appraisals ever in Delaware, where
most such suits are brought, according to a review of court filings.
Mr. Murdock paid $13.50 per
share to take the California-based fruit producer private. The deal,
valued at $1.2 billion, closed Nov. 1.
Appraisal is a legal
proceeding in which dissenting stockholders in a cash-out merger can
ask a judge to determine the fair value of their shares. Both sides
submit dueling valuations, and a judge can choose one or decide upon
arbitrage, where hedge funds buy up shares of companies on the brink
of a buyout and seek appraisal, has emerged as a popular investment
strategy. At least 20 deals have drawn appraisal claims in Delaware
court this year. Before that fewer than five was more typical.
A 2007 court ruling opened
the door to more appraisals when it allowed investors to claim
appraisal on shares they acquired after a deal's record date, the date
that determines which shareholders are entitled to vote on a deal. By
letting firms come into the stock and seek appraisal after the record
date, the decision lowered the risk that the vote on the deal would
fail, as record-date holders who want to seek appraisal must vote no.
The shift also gave investors time to review financial information
that is often published after a record date is set.
Low interest rates have
helped popularize appraisals, too. Investors are guaranteed interest
on their claims of 5% above the federal funds rate, whether they win
or not. The risk for investors is that shares are appraised below the
deal price; also, appraisal litigation can take years, tying up
investors' money in the meantime.
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