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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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