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Investors settle litigation over Dole Food's buyout for $400 million


(Reuters) — Investors in Dole Food Co. and the fruit importer's chief executive agreed to settle litigation over the company's 2013 buyout, clearing the way for shareholders to begin receiving more than $400 million in payments in the coming months.

The litigation stems from allegations that shareholders were shortchanged when Dole Chief Executive Officer David Murdock bought the company for $13.50 per share, or about $1.2 billion.

While the deal was narrowly approved by shareholders, several investors filed a class action alleging the sale was unfair.

In August, Vice Chancellor Travis Laster found after a nine-day trial that Murdock's former top lieutenant, Michael Carter, had fraudulently manipulated the sale process and undervalued Dole, which is based in Westlake Village, California.

Laster awarded damages of $2.74 per share.

Monday's settlement agreement ends the possibility that either side could appeal, which could have taken another year to resolve.

If the class action settlement is approved by Laster, shareholders will receive their damages, totaling $101 million, plus interest of at least $14 million.

In addition, a group of hedge funds brought what are known as appraisal actions, in which they ask the court to determine the fair price for their stock. They opted out of the class action settlement, according to court papers.

The funds affiliated with Merion Capital, Hudson Bay Capital, Magnetar Capital and Fortress Investment Group, held about 17.29 million Dole shares, and court papers said they reached a separate settlement which was not disclosed.

Unlike investors in the class action, the hedge funds did not receive the original $13.50 per share when the deal closed, meaning Dole still owes them $233.4 million. With damages and interest, and the hedge funds could be collecting more than $300 million.

The defendants also agreed not to challenge legal fees for shareholder attorneys who could seek up to 30% of the judgment.

Dole's general counsel and Stuart Grant, who led the class action, did not immediately respond to requests for comment.

The judgment was among the largest of its kind in a class action lawsuit challenging a buyout, and commentators expected Murdock to appeal. Murdock said he overpaid for Dole.

The case featured a rarity in shareholder class actions -— a chief executive subjected to tough cross examination.

Murdock, 92, rambled on the stand and his attorneys tried to portray him as confused, which Laster rejected. The judge found Murdock controlling and said his testimony lacked credibility.