- 34 -
and $6,574 per share for the Recapitalization. IPC then
determined that a marketability discount of 35 percent should be
applied because of the following factors: (1) The transactions
at issue involved minority interests, which are harder to sell;
(2) the size of FIC precluded the possibility of a public
offering; and (3), as of the relevant dates, no dividends had
ever been paid by FIC on its common stock. After applying the
marketability discount, IPC determined that the fair market value
of the stock, per share, was $7,388 in 1980 and $4,273 in 1981.
In comparison, book value per share after applying a 30-percent
minority interest discount and a 35-percent marketability
discount was determined to be $4,703 in 1980 and $5,048 in 1981.
Applying book value as a floor in the valuation, IPC determined
that use of the income method resulted in an undervaluation.
Petitioners have relied upon IPC's second method of
valuation, the EBITDA multiple method. Under this method, a
multiple of net earnings before interest, taxes, depreciation,
and amortization (EBITDA) was used to determine total enterprise
value. IPC determined the EBITDA of FIC for the FY 1979 through
FY 1981. In valuing the 1980 Gifts, IPC used a multiple of FY
1979 EBITDA; a multiple of the weighted average of EBITDA for FY
1979 through FY 1981 was used to value the stock transferred in
the Recapitalization. The parties have stipulated FIC's EBITDA
for FY 1979 through FY 1981, using the figures determined by IPC.
IPC determined that a multiple of 4 to 6 times EBITDA was a
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