Dole CEO, Execs To Pay $114M In Merger Fraud
By Kat Greene
Angeles (December 7, 2015, 6:33 PM ET) --
Dole Food Co. Inc. CEO David Murdock
and several other executives reached a deal Monday to pay investors $114
million over a purported fraud aimed at driving down the company’s price
before a 2013 take-private deal, eschewing an appeal of the damages
awarded by a Delaware Chancery judge in August.
Murdock will issue a payment to shareholders who held stock in the company
during an alleged scheme tied to a go-private deal in which the CEO, who
already owned 40 percent of Dole, sought to regain exclusive control of
the company at a lower price by selling off businesses and land, according
to a stipulation filed in Delaware Chancery Court.
In his August finding that Murcock and General Counsel C. Michael Carter
liable for $148 million to investors,
Vice Chancellor J. Travis Laster wrote that although the Dole board's
merger committee made a Herculean effort to overcome Murdock and Carter's
efforts to keep investors in the dark, it was deprived of information
about the company's ability to cut costs and improve income and was unable
to negotiate on a fully informed basis to reject the merger offer.
The settlement will pay investors $101 million in damages and $12.5
million in interest, according to the stipulation. The deal would block
Murdock and Carter from appealing the August award, according to the
"Subject to the approval of the Court of Chancery and other conditions set
forth below … for the good and valuable consideration set forth herein,
the litigation shall be finally and fully settled, compromised and
dismissed, with prejudice,” the parties wrote in the stipulation.
The defendants also agreed not to oppose the plaintiffs' attorneys' fee
application, so long as it’s under 30 percent of the class payment,
according to the filing.
Murdock, who had previously taken Dole private in 2003, sold 41 percent of
the company in a 2009 initial public offering to pay down the company's
debt and loans on some of his real estate ventures. The 2013 buyout
The shareholders claimed Murdock made a series of moves to depress Dole's
value before the merger, including the nearly $1.7 billion sale of its
Asian business in 2012 to Japan's
Itochu Corp. and the CEO’s $300
million sale of the Hawaiian island of Lanai to software mogul Larry
The plaintiffs have also claimed Dole’s stock should have been worth more
than the $13.50-per-share buyout price, but its value was depressed by
pessimistic press releases, a suspended $200 million share repurchase
program and an earlier go-private bid at an even lower price.
The settlement follows a nine-day trial earlier this year on Murdock and
Carter's conduct during the $1.6 billion go-private deal in which Murdock
sought to regain exclusive control of the company known for its fresh
bananas and pineapples.
Vice Chancellor Laster then found in August that Murdock and Carter were
liable for $148 million, a figure plaintiffs’ attorneys said at the time
could climb even higher as interest added up.
The judge found the other defendants in the shareholder suit were not
liable. Former CEO David A. DeLorenzo erred by siding with Murdock but did
not commit the breaches of fiduciary duty that led to liability, he wrote
in the August decision.
Vice Chancellor Laster also rejected the shareholders' effort to impose
liability on Murdock's financial adviser and bank,
Deutsche Bank Securities Inc. and Deutsche Bank AG, finding
that although they acted improperly by favoring Murdock and treating him
as the real client, they did not knowingly take part in the breaches
leading to liability and their conduct was not causally linked to damages.
Representatives for the parties didn’t immediately respond to requests for
comment on Monday.
The shareholders are represented by Stuart M. Grant, Geoffrey C. Jarvis
and Nathan A. Cook of
Grant & Eisenhofer PA, Randall J.
Baron, A. Rick Atwood Jr., David T. Wissbroecker, Edward M. Gergosian and
Maxwell Huffman of
Robbins Geller Rudman & Dowd LLP, and Marc A. Topaz, Lee D.
Rudy, Michael C. Wagner, J. Daniel Albert and Justin O. Reliford of
Kessler Topaz Meltzer & Check LLP.
Dole and the individual defendants are represented by Bruce L. Silverstein
and Elena C. Norman of
Young Conaway Stargatt & Taylor and
Theodore M. Mirvis and William Savitt of
Wachtell Lipton Rosen & Katz. Deutsche
Bank is represented by David Hennes of
Ropes & Gray LLP and Steve Norman of
Potter Anderson & Corroon LLP.
The cases are In re: Dole Food Co. Inc. Stockholder Litigation, case
number 8703, and In re: Dole Food Co Inc. Appraisal Litigation, case
number 9079, in the Delaware Court of Chancery.
--Additional reporting by Peter Hall. Editing by Emily Kokoll.
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