The High Court has set a multiplier of four for valuing Kush Seafarms Limited in an oppression case between the company’s two equal shareholders, but deferred deciding the orders to be made.
In a judgment delivered on 20 February 2020, Mr Justice Mark Sanfey assessed expert evidence about the value of the aquaculture business, which farms and sells mussels. The parties had agreed that the relevant valuation date was 30 April 2018, and that the company’s adjusted net asset value was €350,000 and its EBITDA was €215,000.
Flor Harrington brought the proceedings under section 212 of the Companies Act 2014 against his brother, John Harrington, and the company. Each brother owns half of the issued share capital and is a director. John Harrington denied the allegations of oppression or disregard of interests, but accepted for the purposes of the hearing that “technical oppression” had occurred, engaging the court’s jurisdiction to address the valuation dispute.
The brothers agreed that Flor Harrington’s shareholding should be bought out, but their experts disagreed on the multiplier. Claire Cowhig, for the applicant, proposed eight, relying in part on data from much larger businesses. Paul Clarkin, for the respondent, used small-business transaction data and proposed a lower multiplier. The judge found the evidence supporting both approaches unsatisfactory: Moy Park was not a suitable comparator for a business of Kush’s scale, while most of Clarkin’s transactions concerned retail businesses, and the sample lacked background detail.
The judge accepted that the company was generally profitable and stable, with good prospects, while recognising risks from expansion and competition. He rejected Clarkin’s assumption that an upfront payment warranted a discount in this case, where the proposed transaction was a cash buy-out by the respondent. He also found no evidence that the company’s licence was likely to be withdrawn or that a harvest failure was a particular risk.
Sanfey said there was a shortage of material for a reasoned assessment, but concluded that a multiplier at the upper end of the range of one to four was warranted. Applying four to the agreed EBITDA and adding the agreed net asset value produced a company valuation of €1.21 million.
The judgment did not make a final order for the purchase or set out the amount payable for the applicant’s shares. The judge said he would hear the parties on the appropriate orders.