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Update: Cayman court’s first valuation verdict on minority side

East Capital, a Sweden-based asset manager, specialising in emerging and frontier markets, said it won a landmark case in the Cayman Islands defending the rights of minority shareholders.

The case, involving Russian oilfield services company Integra Group, saw the Cayman Islands Grand Court make a valuation decision under section 238 of the Cayman Islands Companies Law. Court-led valuations are common in the US, but this was a first for the Cayman Islands.

On its company website, Integra said that it completed a management buyout deal with East Capital in February 2014, which offered $10 per share. Although there was dissent among the shareholders about the acquisition’s value, the merger was passed by special resolution.

East Capital then petitioned the courts before Justice Jones QC. After listening to the expert valuations from each side, he ruled that the fair value of the company at the date of the merger was $11.70 per share, and ordered payment plus interest to be made to the dissenters. East Capital told Fund Selector Asia that it held a total of 17.3% of the shares in Integra and that it was awarded $18.2m for its stake, plus interest amounting to $1.04m. 

Integra, represented by international law firm Walkers, said in a statement that “the deal approved by a majority of shareholders at an offer price of $10 per share was a significant premium on the pre-offer share price”. Walkers noted that while the judgment is clear, there is no “one-size-fits-all” model.

Commenting on the case, Jacob Grapengiesser, a partner at East Capital, said: “As a long term and active shareholder, we saw it as our responsibility in this case to do our utmost to attain fair value for our fund unit holders.

“This ruling contributes to positioning the Cayman Islands legal system as a credible enforcer of legal rights in conjunction with responsible and transparent investment practices,” Grapengiesser added.

Luke Ng, senior vice president at FE Advisory Asia told Fund Selector Asia that this is a landmark case as the court had sent a message to market participants that the rights of minority shareholders could be taken care of sensibly.

“Going forward, the board of directors and senior management of companies should pay more attention to the ‘fairness’ of value determination in order to protect themselves against similar claims,” Ng said.

Part of the Mark Allen Group.