Sunday 25 February 2018

Mushroom stake must be bought by key shareholder

Ms Justice Finlay Geoghegan said it was regrettable the two groups of shareholders had fallen out
Ms Justice Finlay Geoghegan said it was regrettable the two groups of shareholders had fallen out

Tim Healy

THE High Court must reconsider a €26.2m valuation it placed on the buyout of a minority stake in a Monaghan-based mushroom business, the Court of Appeal ruled.

ELST, a company whose "driving force" was described by a judge as its manager and controller Ronnie Wilson, was ordered by the High Court just over a year ago to buy out the shareholding of Donegal Investment Group plc (DIG) without discount for €30.6m.

Less than two months later, that figure was revised to €26.2m by the court.

DIG had claimed it was excluded from the affairs of the company following acts of oppression by the majority shareholders and sought orders under company legislation directing ELST to buy out its minority 30pc shareholding or that the entire share capital be sold.

ELST is a holding company formed arising from a merger of Carbury Mushrooms and Monaghan Middlebrook Mushrooms.

DIG brought its proceedings against the majority holders: Danbywiske, Mr Wilson, the Wilson Limited Partnership One, Monaghan Mushrooms and ELST itself.

In a judgment last year, Mr Justice Brian McGovern said the respondents had conceded a sample act of oppression by not bringing the purchase by the company of a mushroom business in Canada to the board for approval.

He said however there was no evidence of dishonesty, fraud, divesting of assets or other serious misbehaviour by members of the Wilson family or other respondents which would entitle the court to treat this as such an unusual case meriting an order that a minority shareholder buy out the majority against their wishes.

He also said the buyout of the minority shares should not be in accordance with a 2004 shareholders agreement or under an initial public offering (IPO) of the shares on the stock market.

DIG appealed that decision on a number of grounds, principally that the High Court judge erred in law in the manner in which he reached his conclusion about the buyout and by failing to have regard to the shareholders agreement in rejecting the IPO option.

In her ruling on behalf of a three-judge Court of Appeal, Ms Justice Mary Finlay Geoghegan said the respondents must buy DIG's 30pc holding and sent the question of price back to the High Court.

Among the directions she gave to the High Court in reconsidering the matter, she said the price should be at full current market value of the shares without discounts for minority, cash flow or marketability.

Earnings before interest, taxes, and amortisation should be determined in the same manner as in 2014, she said.

Ms Justice Finlay Geoghegan said it was regrettable the two groups of shareholders had fallen out.

She urged the parties "in their own interests to make a further attempt to resolve the single outstanding issue", that of price.

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