- 42 -
In his comparable companies analysis, Mr. Hanan utilized
practically the same group of comparable public companies used by
Mr. Weiksner. Mr. Hanan began with normalizing JPMS' financial
results. For instance, Mr. Hanan concluded that the combined
compensation paid to Messrs. Mitchell and DeJoria would not have
exceeded $2.5 million if they were paid under arm's-length
conditions; Mr. Hanan thus adjusted the historical financial
performance to reflect arm's-length rates. He believed that a
shareholder of the 49-percent block would likely reach an
accommodation with Mr. DeJoria regarding his compensation before
agreeing to a price for those shares. For purposes of this
analysis, Mr. Hanan accordingly assumed Mr. DeJoria's compensation
would be set at $5 million per year after the valuation date.
Mr. Hanan's comparable companies analysis indicated a $272
million value for JPMS on a publicly traded, minority interest
basis. He subsequently applied a 30-percent discount for lack of
marketability (concluding that JPMS' size, profitability,
shareholder rights, dividend paying capacity and policy, as well as
transfer restrictions, all favored a below-average marketability
discount, while Mr. DeJoria's anticipated intention to continue
drawing excessive compensation favored an above-average
marketability discount). By applying the 30-percent discount to
his $272 million value for JPMS, Mr. Hanan determined an $81
million fair market value for the 1,226 shares of JPMS common stock
as of April 21, 1989.
Page: Previous 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 NextLast modified: May 25, 2011