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distributor position, it will have a tendency to drive up the
price beyond what a potential buyer would be willing to pay based
upon the present value of anticipated cashflows. According to
Dr. Bajaj, both of those factors act as a significant deterrence
to would-be bidders for the shares, and, therefore, they reduce
the value of the shares.
In his rebuttal testimony, Dr. Spiro responds that Korbel is
not “such a complex organization that the costs of analyzing the
company for bidding purposes would be prohibitively high.”
Dr. Spiro argues that Dr. Bajaj’s concerns regarding Brown-
Forman’s ROFR “are more appropriately applied to * * * [complex
high-tech companies] where the ‘hidden’ value of * * *
[intellectual property] can make accurate analysis difficult and
expensive, especially for an outsider.” Dr. Spiro agrees,
however, that some discount is warranted for the ROFR and, as
noted above, has included it as part of its basic 15-percent
liquidity discount.
(3) Amount of Additional Discounts
We agree with Dr. Bajaj that an additional 10-percent
discount for Brown-Forman’s ROFR and the purchaser’s lack of
control over future dividend-liquidation policy (i.e., the
purchaser’s minority status) is warranted. We ascribe most of
that discount to the minority status issue, which both Drs. Bajaj
and Spiro agree deserves recognition. Both Drs. Bajaj and Spiro
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