Ford v. Courier-Journal Job Printing Co., COURIER-JOURNAL

• Decision Date: 18 June 1982
• Docket Number: COURIER-JOURNAL
• Citation: 639 S.W.2d 553
• Parties: Edward A. FORD, III, Robert L. Hiller, William B. Meares, Donald H. Bowen, and Norman T. Kinzie, Appellants and Cross-Appellees, v.JOB PRINTING COMPANY, Appellee and Cross-Appellant.
• Court: Kentucky Court of Appeals

Page 553

639 S.W.2d 553

Edward A. FORD, III, Robert L. Hiller, William B. Meares Donald H. Bowen, and Norman T. Kinzie, Appellants and Cross-Appellees, v. COURIER-JOURNAL JOB PRINTING COMPANY, Appellee and Cross-Appellant.

Court of Appeals of Kentucky.

June 18, 1982.

Supreme Court Order Denying

Discretionary Review Oct. 6,

1982.

Ralston W. Steenrod, Octavia B. Wilkins, John A. Bartlett, Louisville, for appellants and cross-appellees.

Charles H. Zimmerman, Jr., John G. Treitz, Jr., Greenebaum, Treitz & Maggiolo, Louisville, for appellees and cross-appellants.

Before GANT, HOGGE and WINTERSHEIMER, JJ.

GANT, Judge.

Appellee, Courier-Journal Job Printing Company (which is not affiliated with or related to the newspaper) is a 100-year-old producer of lithographic and letter press materials, specializing in liquor labels, books and journal job printing. In 1977 and 1978, the company had received several offers for the purchase of its stock, at least three of which were from E. A. Ford, III, one of the appellants herein, who was at that time in management of the company. After rejecting previous offers, in 1978 the company began negotiations with Stevens Graphics, Inc., for a sale of many of the assets and of At the shareholders' meeting, the sale was approved by an overwhelming majority. The appellants herein voted their 4.9% of the Company's shares against the sale, as did the executors of an estate, not parties to this appeal, who owned 7.9% of the outstanding stock. On December 27, 1978, appellants formally elected to proceed as dissenting stockholders under the provisions of KRS 271A.405 and, through their attorney and in compliance with that statute, demanded payment of the fair value of their shares as of the statutory date, that date being December 20, 1978, the day before the vote approving the sale was taken.

the business of the Company. In November of that year, the president and chairman of the board of the Company sent notice to all shareholders of a special stockholders' meeting, to be held on December 21, 1978, the principal purpose of which was to approve and authorize the sale to Stevens, which notice included a nine-page memorandum outlining the proposed terms.

After receiving the notice of dissent, the Company requested an appraisal from First Kentucky Investment Advisors, which fixed the fair value at $96.70 a share as of the statutory date. The Company sent a copy of this appraisal and a written offer for this amount to the appellants. In March, 1979, the appellants were offered the same redemption plan as all other shareholders, which plan ultimately resulted in the payment of approximately $150 per share after many months. These offers were rejected and the Company then filed this action pursuant to the statute on April 6, 1979, asking the Jefferson Circuit Court to determine the fair value of appellants' shares as of December 20, 1978.

It probably should be noted at this point that a wide and deep chasm lay between the sale of certain assets to Stevens and the value of the stock on the statutory date. In the Stevens sale, the Company retained certain assets, of a value of over $1 million, the exact price for the assets sold being predicated on certain pre-tax earnings for an ensuing period, together with other contingencies. The value of the stock on the day prior to the sale would, of course, include the retained assets; would not have any relationship to the earnings of the company in the ensuing 14 months, and would not contain the contingencies set out in the sale to Stevens.

After the issues in this action were joined, appellants commenced a thorough process of discovery, receiving two large volumes of requested information from the appellee, which volumes contained 52 separate exhibits, including audited balance sheets, sales agreements between the Company and Stevens, consulting the employment agreements with officers, lists of encumbrances, correspondence, appraisals, dividend records, retirements plans, leases, etc. Additionally, depositions were taken and, on August 24, 1979, appellants moved for the appointment of an appraiser "to receive evidence on and recommend to the court ... the fair value ..." of their stock. They further requested an appraiser for certain retained real estate, but the court was advised that the real estate was being sold and thus an appraiser was not appointed for the real estate.

Following the sale of the real estate, the Company made a second offer to the appellants for their stock. The original offer of $96.70 per share was increased to $131.00 per share, with each party to pay his own attorney's fees to date and his own share of the cost. This offer was rejected by the appellants.

On April 28, 1980, pursuant to KRS 271A.405(7), and further pursuant to the request of the parties, the court appointed two appraisers who had been recommended by the parties. These appraisers were General Dillman A. Rash and E. Halsey Sandford, Jr., both with impeccable credentials and with a background of education and experience totally qualifying them as financial analysts, eminently capable of evaluating the stock.

The appraisal process then began. The appraisers were furnished with all information they requested, copies being furnished to opposing counsel. The appraisers requested and were granted interviews with In the course of our analysis, we considered a number of factors including: the nature of the business and its history; the economic outlook in general and for the industry; the apparent objectives of management shareholders; the financial condition of the business including intangible assets, contingent liabilities and capital position; the earning and dividend paying capacity of the Company; the public market prices of comparable companies as related to several key ratios; underlying net asset value; other transactions in C-J Job Printing stock and the nature of its market; the Stevens Graphics proposal and other offers to purchase all of the operating assets and liabilities of the company; and contemporaneous transactions in the private placement and acquisition marketplace. We also drew upon our own experience in pricing and negotiating merger and acquisition transactions, in planning and effecting corporate liquidations and in structuring business proposals acceptable to corporate and individual investors under a variety of market conditions.

the Company officers, at which interviews counsel for both appellants and appellee were present. Attorneys for each side were given opportunity to furnish any arguments or documentation in support of their position. The Company delivered a ten-page memorandum, together with 54 exhibits, and the appellants declined, reserving their presentation for the court. On August 12, 1980, the appraisers submitted their appraisal to the court, reflecting that the fair value of the common stock was $124.00 per share. This appraisal report was some 15 pages in length, with five pages of appended exhibits. The factors considered by the appraisers were set out in their report, as follows:

Appellants and appellee agree that the law concerning the appraisal of fair value of the stock of dissenting stockholders is as succinctly stated in the case of In Re Valuation of Common Stock of Libby, Etc., Me., 406 A.2d 54, 60 (1979). That case states that the consensus among jurisdictions with statutes patterned after the Model...