Caribou Investors Get Less than Deal Price in Minn. Case

By Michael Greene

Dec. 17 — In a rare ruling, a Minnesota state court Dec. 15 found that Caribou Coffee Co. shareholders challenging Joh. A. Benckiser Holding Group's (JAB) $340 million acquisition of the company were entitled to receive less than the merger price paid.

Using a discounted cash flow (DCF) analysis, Judge Ronald Abrams of Minnesota's Fourth Judicial District determined that three investors seeking a statutory appraisal of their shares weren't entitled to relief beyond the $15.03 per share they were paid by the Minnesota corporation, even though the merger price was $16 per share.

“Synergies and other values resulting from mergers are not relevant factors in determining fair value,” Abrams wrote, citing the state's appraisal statute. “Because of this, shareholders seeking appraisal run the risk of getting less than the merger price.”

Abrams added that the Delaware courts repeatedly have found in appraisal actions that the fair value of a merger can be below the transaction price.

Fair Market Value

The three shareholders who sued over JAB's acquisition of Caribou in 2013 collectively owned 852,571 shares of Caribou's common stock. After they notified the company of their intent to challenge the transaction, Caribou paid them $15.03 per share—approximately 6 percent less than the purchase price. The company claimed that this price constituted the fair of value of the investors' shares at the time of the transaction.

The shareholders—who included Richard Fearon, managing director of hedge fund Accretive Capital Partners LLC—filed an appraisal action claiming that the fair value of the company was $22 per share.

However, the court ruled that based on DCF analysis, the fair value of the company's stock was $14.45 per share. Accordingly, it held that the investors had been paid in full for their shares.

No Adviser Conflict

The court also determined that the fairness opinion by Moelis & Co. LLC, Caribou's financial adviser, and the adviser's receipt of a contingent payment weren't improper.

“An overwhelming majority, over 81 percent, of under $1 billion transactions closed between January 1, 2011, and December 31, 2013, had financial advisors that rendered fairness opinions,” Abrams said. “During the relevant timeframe, contingent fees for financial advisors (for transactions of comparable size to the one at hand) were not uncommon or inherently inappropriate.”

Abrams also found that Moelis's involvement in JAB's acquisition of Coty Inc. didn't create a conflict, reasoning that the prior dealing had been disclosed to shareholders and adequately vetted by Caribou's board.

JAB's counsel—Paul Lockwood, a Wilmington, Del.-based partner at Skadden, Arps, Slate, Meagher & Flom LLP—told Bloomberg BNA he was not authorized to speak on the record. Fearon did not immediately respond to a request for comment.

To contact the reporter on this story: Michael Greene in Washington at

To contact the editor responsible for this story: Yin Wilczek at

For More Information

The opinion is available at