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Asset-Based Value
In connection with determining an asset-based value, Mr.
Hitt used a 38-percent minority interest discount. To calculate
this number, he began with Mergerstat Review, which contains data
from sales of bank stock in merger transactions, and made
adjustments to account for the fact that JFI was not a bank.
Applying his minority interest discount of 38 percent to the
undiscounted per-share value of $1,818 resulted in a value of
$1,127 per share.
To compute a lack of marketability discount, Mr. Hitt
started with a figure of 45 percent, based, according to him, on
a comparison to restricted securities and studies of the prices
of stocks before initial public offerings. He increased the
discount to 50 percent because he believed there would be some
difficulty in selling the farm and to account for costs in
selling the farm.4 Applying the lack of marketability discount
to the discounted per-share value of $1,127 resulted in a value
of $564 per share.5
4 Mr. Egan used a 50-percent minority interest discount and
a 35-percent lack of marketability discount, very similar, in end
result, to Mr. Hitt’s 38-percent minority interest discount and
50-percent lack of marketability discount.
5 If Mr. Egan had applied his lack of marketability discount
before weighting the two values, as Mr. Hitt did, his asset-based
value would have been $591 per share.
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