Risk & Compliance

Dole CEO Hit With $148M Award Over Buyout

David Murdock and the company's COO deprived shareholders “of their ability to consider the merger on a fully informed basis and potentially vote i...
Matthew HellerAugust 27, 2015

A Delaware judge on Thursday ordered Dole Food CEO David Murdock and a former top aide to pay shareholders more than $148 million, finding that they manipulated the company’s stock price so Murdock could take it private on the cheap.

The $1.2 billion, or $13.50-a-share, buyout was “arguably fair,” Delaware Chancery Court Judge Travis Laster ruled, but the “machinations” of Murdock and former Dole Chief Operating Officer C. Michael Carter deprived shareholders “of their ability to consider the merger on a fully informed basis and potentially vote it down.”

Laster heard the shareholders’ fraud case at a nine-day trial in February. He held Murdock and Carter jointly liable for $148.2 million in damages, valuing Dole at $16.24 a share. The plaintiffs had sought $25 a share.

“We are extremely pleased not only with the large financial recovery, but the forceful way in which the court excoriated the defendants for the brazen way they tried to hijack Dole for their own advantage in taking the company private,” Stuart Grant, co-lead counsel for the shareholders, said in a news release.

By taking Dole private, Murdock was able to buy back the 60% stake in the company that he sold to the public in 2009.

“Murdock evidenced his distaste for the public company model in how he ran Dole,” Laster noted. “Murdock was an old-school, my-way-or-the-highway controller, fixated on his authority and the power and privileges that came with it.”

The 91-year-old billionaire testified at trial that the investors were unfairly painting him “as a skunk” and that he didn’t engineer the deal to enrich himself.

But Laster said that before Murdock made his offer, Carter misled the board about the savings Dole could realize after selling about half of its business in 2012 and cancelled a recently adopted stock repurchase program for “pretextual reasons.”

“These actions primed the market for the freeze-out by driving down Dole’s stock price and undermining its validity as a measure of value,” Laster wrote.

Carter also provided directors with “lowball management projections,” the judge said, concluding that the lawsuit award to shareholders was “conservative relative to what the evidence could support.”