- 7 -
and the thrift plan as a viable option because, among other
things, petitioner wanted the recapitalization to effect a
20-percent shift in ownership so that the public shareholders
could treat their cash distributions as capital gains rather than
as dividends.
Due to the increased trading price for old FMC stock, and on
the advice of Goldman, Morgan Stanley, Morgan Guaranty Trust
Company (Morgan Guaranty), and outside counsel, petitioner's
board approved on April 26, 1986, a revised plan of
recapitalization (revised plan) which increased the cash payment
to public shareholders to $80 per share. Goldman now believed
that each share of new FMC stock was worth $17.14 (instead of
$15) and that each holder of old FMC stock would receive the
equivalent of $97.14. Petitioner announced the revised plan on
April 28, 1986. Approximately 2 days before, the plaintiffs in
the purported class action lawsuits agreed to resolve their
claims subject to, among other things, payment to them of $1
million and the revision of the first plan.
Both Goldman and Morgan Stanley opined to petitioner's
board, by letters dated April 26, 1986, and April 27, 1986,
respectively, that the consideration to be received by public
shareholders under the revised plan was fair. The revised plan
was approved by petitioner's shareholders at the annual meeting
held on May 22, 1986, and petitioner completed the
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