A Delaware judge on Thursday ordered 92-year-old Dole Food CEO David Murdock and a former top lieutenant to pay $148 million in damages for misleading directors and shareholders in a deal that took the company private in 2013.
The judge on Thursday said the billionaire businessman, along with former Dole president and chief operating officer C. Michael Carter, breached their fiduciary duties of loyalty in structuring a $1.2 billion cash buyout that left the fruit-and-vegetable giant in Murdock’s hands.
Vice Chancellor Travis Laster noted that a board committee was able to overcome most of the two men’s “machinations,” negotiating an increase in Murdock’s initial $12 per share offer to a deal price of $13.50, which received a narrow 50.9 percent approval from stockholders.
“But what the committee could not overcome, what the stockholder vote could not cleanse, and what even an arguably fair price does not immunize, is fraud,” wrote Laster, whose damage award represents an incremental value of $2.74 per share.
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Morgan Evans, a Dole Food spokeswoman, said the company had no comment on the ruling.
Attorneys for Murdock and Carter did not immediately respond to email messages seeking comment.
Murdock is best-known in North Carolina for investing more than $800 million to turn an abandoned Kannapolis textile mill into a multimillion-dollar nutrition research campus. The health-food devotee has also invested more than $100 million in an institute that bears his name.
Stuart Grant, an attorney representing shareholders in the litigation, noted that the judge concluded that shareholders were entitled not only to a fair price, but to “a fairer price designed to eliminate the ability of the defendants to profit from their breaches of the duty of loyalty.”
“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,” Grant said in a prepared statement.
Among other things, Laster said that before Murdock made his initial buyout proposal, Carter made false disclosures about how much money Dole could save by selling roughly half its business in 2012, and canceled a stock repurchase program. Then, after Murdock made his proposal, Carter provided the board committee with lowball management projections, followed by a secret meeting the next day in which Murdock’s advisers and financers were given more positive and accurate data.
“His job was to carry out Murdock’s plans, and he did so effectively, even ruthlessly,” Laster said of Carter’s role after taking over day-to-day management of the company in early 2013.
The efforts to undermine the committee continued throughout the deal process, the judge said.
“The projections Carter provided were knowingly false,” Laster wrote in his 106-page opinion. “Carter intentionally tried to mislead the committee for Murdock’s benefit.”
Laster declined to hold Murdock’s financial adviser and lead financing source, Deutsche Bank, liable for its actions.
“Deutsche Bank acted improperly by favoring Murdock and treating him as the bank’s real client in transactions before the merger, even when Deutsche Bank was officially representing Dole, but Deutsche Bank did not participate knowingly in the breaches that led to liability, and Deutsche Bank’s role as Murdock’s advisor did not lead causally to damages,” the judge concluded.