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similar to those of non-guaranteed-payout comparables; and (3)
the companies without guaranteed dividend payouts, on average,
outperformed CCC in the short term (3-month and 1-year returns).
Mr. Frazier compared CCC to the upper quartile of companies
(Morgan Grenfell and Central Securities), noting that the average
discount rate was 18.3 percent and the performance was as
follows:
3 Months 1 year 3 years 5 years
Upper quartile 28.1% 34.7% 16.2% 21.9%
CCC 6.0 17.8 25.1 22.9
In the final analysis, Mr. Frazier concluded that a hypothetical
buyer would seek a lack-of-control discount of 25 percent, which
comprised 20 percent on the basis of the comparables he selected
and an additional 5 percent because of other less significant
dissimilarities with CCC.
In contrast, Mr. Shaked applied a 5-percent discount for
lack of control. His analysis began with an average discount
(8.61 percent) for closed-end funds that he obtained from an
article in the Journal of Economics. Mr. Shaked considered CCC
a well-managed holding company with a diversified portfolio of
marketable securities. Accordingly, he believed that management
decisions, which are more critical in certain types of operating
companies, were less relevant and that a hypothetical buyer/
investor of CCC stock would be less concerned about lack of
control. It was also Mr. Shaked’s view that an investor in CCC,
much like investors of mutual funds, would prefer not to have
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