Compass Lexecon’s Client Cox Radio, Inc. Prevails in Litigation Over Fair Value of Shares

Compass Lexecon’s Client Cox Radio, Inc. Prevails in Litigation Over Fair Value of Shares

On May 29, 2009, Cox Enterprises, Inc. consummated a short-form merger in which Cox Enterprises, Inc., through its wholly-owned subsidiary Cox Media Group, acquired the shares of Cox Radio, Inc. stock it did not own at a price of $4.80 per share. Petitioners (Towerview LLC et al.) alleged that the merger consideration of $4.80 per share substantially underestimated the value of their shares.

Compass Lexecon was retained by Respondents to analyze the value of the shares. Compass Lexecon expert Rajiv Gokhale testified at a four-day trial at the Court of Chancery of the State of Delaware that the fair value of the petitioners’ shares was in the range of $3.40 to $5.29, with a midpoint of $4.28 per share. By contrast, Petitioners’ valuation expert testified that the fair value of the petitioners’ shares was between $11.05 and $12.12 per share.

On June 28, 2013, Vice Chancellor Donald F. Parsons issued an opinion concluding that the fair value of petitioners’ shares was $5.75 per share. In reaching his decision, Vice Chancellor Parsons accepted and began with “Gokhale’s model as a general framework,” because “Gokhale’s approach provides a more appropriate starting point,” and found “Gokhale’s valuation approach to be more reliable generally.”

Compass Lexecon worked with Kevin Abrams, J. Peter Shindel Jr., and Daniel Gordon of Abrams & Bayliss LLP. Rajiv Gokhale was assisted by Cliff Ang, Margaret Hlebowitsh, Avisheh Mohsenin, Andrew Lin and others in Compass Lexecon’s Chicago office.