Johann T. and Johanna Hess - Page 46

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          Other Items                                                                 
               In a letter of intent dated September 28, 1994, Dover                  
          Diversified proposed to purchase all the outstanding stock of HII           
          for $44 million or approximately $393,000 per share.  Throughout            
          these proceedings, respondent has alluded to this letter of                 
          intent as evidence of the fair market value of HII stock.42                 
          However, we are not convinced that the proposed purchase price is           
          a reliable indicator of the fair market value of HII stock.  The            
          letter of intent was not binding on the parties, and Dover                  
          Diversified decided not to purchase HII.  It is not at all clear            
          whether Dover Diversified conducted the type of investigation or            
          due diligence which might produce a reliable value indicator.               
          Neither petitioners’ expert nor respondent’s expert relied upon             
          the letter of intent.  Indeed, Mr. Engstrom testified:                      
                    To the extent that there is an amount that was                    
               communicated in the letter of intent as a possible                     
               acquisition price, then, you know, possibly there’s                    
               some valuation information.  But, as we said in our                    
               report, we didn’t place any reliance upon it.  So it’s                 
               pretty weak valuation information.                                     


               41(...continued)                                                       
          cashflow method.  We likewise give Mr. Engstrom’s discounted                
          cashflow analysis no weight.                                                
               42Respondent’s position on this item is confusing.                     
          Considerable time was spent at trial and on brief regarding the             
          letter of intent.  However, respondent’s expert did not rely upon           
          that item, and respondent does not object to petitioners’                   
          requested finding of fact that “The Dover Diversified non-binding           
          letter of intent is not a reliable indicator of the value of                
          HII’s stock.”                                                               




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