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discount by calculating the inverse of what they considered to be
the appropriate control premium for RBI. Mr. Herber also
considered other factors in determining his recommended minority
interest discount.
a. The Estate’s Expert
Mr. Schroeder recommended a minority interest discount of 17
percent on the basis of information contained in Mergerstat
Review 1998 regarding offers to acquire a majority interest or
total ownership of public companies. From this information, with
little explanation, he calculated a control premium of 20 percent
and an implied minority interest discount of 17 percent. As a
basis for this conclusion, Mr. Schroeder states simply that “For
Royal Banks of Missouri we have selected a control premium of 20%
as being reasonable considering its size, financial performance
and geographic location.”
b. Respondent’s Expert
Mr. Herber relied on a study of minority interest discounts
by Christopher Mercer in Quantifying Marketability Discounts.
The Mercer study indicated a median and average minority interest
discount of 19 percent. Mr. Herber conducted his own study of
control premiums in transactions involving banking companies. He
concluded that these transactions indicated median and average
minority interest discounts ranging from 18.4 to 19.6 percent,
which was “equivalent” to the Mercer study results.
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