Shareholders are suing the board of Dole Food Co. Inc. in response to a buyout offer from chief executive officer David Murdock.
The cases claim Murdock is low-balling shareholders and using his position with the company to influence the deal.
The Setrakian Family Trust — which holds Dole shares — filed a class action case against the Westlake Village, Calif., company’s board in the Delaware Court of Chancery in Wilmington, Del., June 14.
In a California class action case filed in Superior Court in Los Angeles, lead plaintiff and stockholder Setrakian Family Trust contends Murdock’s offer is opportunistic because it comes when banana sales are down and Dole’s share prices are low.
The California case likens the situation to Murdock’s first buyout of Dole in 2003 when he paid $33.50 per share after initially offering $29.50. Shareholders took similar legal action then to force him to raise his price.
The cases claim the Dole board of directors would violate its legal obligation to get the best price possible if they accept Murdock’s offer of $12 per share. The shareholders also contend the board is not seeking other offers.
Murdock’s bid shortchanges stockholders, providing only $645 million cash even though the bid is for $1.1 billion, according to Bloomberg News.
In his offer, Murdock said he would assume Dole’s debt, according to documents filed with the Securities and Exchange Commission on June 10. He also said if an agreement has not been executed by July 31 he will withdraw his offer, according to the SEC filing.
Murdock also specified in his offer that he expects the Dole board to appoint a special committee of independent directors to consider his proposal. The board issued a statement saying they would take that course of action.
“I will not move forward with the transaction unless it is approved by such a committee,” Murdock’s offer states. “In addition, the transaction will be subject to a non-waivable condition requiring the approval of a majority of the shares of the company not owned by me or my affiliates.”
An analyst writing for The New York Times observed Murdock’s conditions of sale reflect more than an attempt to meet best practices.
Analyst Steven Davidoff reported recent changes in merger and acquisitions legal philosophies, especially for companies such as Dole that are incorporated in Delaware, have spurred the development of the language used in Murdock’s offer.
The clause is an attempt to skirt under the standard that requires heightened scrutiny of so-called freeze-out transactions by corporate management, Davidoff wrote. Application of the heightened standard means the Delaware courts will closely review the Dole deal for fair price and fair dealing, according to Davidoff’s column.