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banks was 13.7, and the average P/E ratio of the 10 Ohio-based
banks was 15.1. Mr. Haywood chose to apply the higher P/E ratio
of 15.1 to FNBW, in part because the underlying banking
organizations were based in Ohio and in part because Mr. Haywood
believed that FNBW had a strong capital position and consistent
growth in earnings and dividends.23 Applying the P/E ratio of
15.1 to FNBW’s 1992 earnings of $1,423,000 resulted in a price
per share for FNBW of $214.87.
Weighting the Results
Mr. Haywood felt that earnings deserved greater weight
because of the strong earnings and dividend performance of FNBW.
Thus, he gave 60 percent of the total weight to his earnings-
based value of $214.87 per share and 40 percent to his asset-
based value of $120.81 per share, for a value of $177.25.
Lack of Marketability Discount
Mr. Haywood applied a 10-percent lack of marketability
discount,24 calculated as follows: After calculating his pre-
discount value for FNBW of $177.25, he estimated the lowest price
at which the current shareholders of FNBW would be willing to
sell their stock. He believed a shareholder would accept
approximately $160 per share. This was roughly equal to a
23 In comparison, Mr. Hitt used a P/E ratio of 14, and Mr.
Egan used a P/E ratio of 11.1.
24 Mr. Hitt’s lack of marketability discount was 45 percent,
and Mr. Egan’s was 35 percent.
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