Deals | Thu Aug 27, 2015 2:03pm EDT

Dole CEO found liable for $148.2 million over 2013 buyout

BY JONATHAN STEMPEL

David Murdock, the billionaire chief executive of Dole Food Co, must pay $148.2 million of damages to shareholders he shortchanged when he took the fruit and vegetable producer private in 2013, a Delaware judge ruled on Thursday.

Delaware Vice Chancellor Travis Laster said the $1.2 billion buyout undervalued Dole by 17 percent, and that the company was worth $16.24 per share rather than the $13.50 that Murdock paid.

Thursday's award is among the largest in a class action lawsuit alleging that a company sold itself for too low a price. Most large U.S. corporate mergers are challenged in court.

The judge said Murdock, 92, and recently retired Chief Operating Officer C. Michael Carter should make up the shortfall after helping depress the share price so Murdock, who then owned 40 percent of Dole, could buy the rest at a lowball price.

Laster held the men responsible for Dole's downplaying its ability to boost profit by cutting costs and buying farms, and canceling a stock buyback. He also said Carter actually engaged in fraud.

"Although facially large, the award is conservative to what the evidence could support," Laster wrote in his 106-page decision, following a nine-day trial in February.

Deutsche Bank AG, Murdock's main bank, was held not liable because it did not knowingly participate in the wrongdoing. Murdock is worth $3.4 billion, Forbes magazine said.

Dole declined immediate comment on behalf of the Westlake Village, California-based company, Murdock and Carter. Deutsche Bank spokeswoman Renee Calabro declined to comment.

While objecting shareholders had sought higher damages, their lawyer Stuart Grant called the decision a "decisive" victory.

"It wakes insiders and investment banks on their proper roles in a management-led buyout, and shows that management can't dictate the terms and the flow of information," he said in an interview. "It shouldn't be a Wild West."

NOT A "CONFUSED OLD MAN"

A high school dropout, Murdock was Dole's chief executive from 1985 to 2007, and returned to that role in 2013.

He had taken Dole private in 2003 and sold 60 percent in a 2009 initial public offering, in part to pay down debt as the U.S. economy struggled.

Murdock said he hoped through the 2013 buyout to combine Dole with his North Carolina research center, which seeks to unlock secrets of health and longevity.

But shareholders portrayed the move as a power play at their expense, a portrayal Laster appeared to accept.

"Murdock was an old-school, my-way-or-the-highway controller, fixated on his authority and the power and privileges that came with it," Laster said.

The judge said Murdock hurt himself during trial testimony, where defense counsel portrayed him as both a "confused old man" and a disengaged CEO.

"By dint of his prodigious wealth and power, he has grown accustomed to deference and fallen into the habit of characterizing events however he wants," Laster wrote.

"That habit serves a witness poorly when he faces a skilled cross-examiner who has contrary documents and testimony," he added."

Several hedge funds opposing the buyout had asked Laster for an appraisal, to determine a fair price for Dole. The judge said that issue might now be moot, but asked the sides to discuss it.

The cases are In re: Dole Food Co Inc Stockholder Litigation and In re: Appraisal of Dole Food Co Inc, Delaware Chancery Court, Nos. 8703, 9079.

(Reporting by Jonathan Stempel in New York; Editing by Alden Bentley and Christian Plumb)