Testimony in shareholder oppression lawsuit

Professor Mark E. Zmijewski, a senior consultant to CRA and Professor Emeritus at the University of Chicago’s Booth School of Business, testified on behalf of plaintiffs in a shareholder oppression lawsuit filed against Promega Corporation and the company’s CEO in the Dane County Circuit Court for the State of Wisconsin.

Promega, a biotechnology company, was founded in 1978 and has been privately held. In 2014, the firm appeared to be on a path of becoming a public company, but that plan was abandoned when the CEO stated that Promega would celebrate its 100th anniversary as a private company.

Plaintiff shareholders claimed that shareholder oppression had occurred and demanded their shares be acquired by the company at fair value.

Professor Zmijewski conducted valuation analysis and assessed the fair value of the Promega shares. After analyzing the company’s forecasts, Professor Zmijewski concluded that these forecasts were not reliable and, therefore, a valuation based on the discounted cash flow methodology would be unreliable. Professor Zmijewski calculated the fair value of the company’s shares using a market multiples valuation analysis.

After a three-week trial in July 2019, Circuit Court Judge Valerie Bailey-Rihn concluded that the Court was “strongly leaning to find [minority shareholder] oppression here” and that Promega’s forecasts were not reliable: “I understand the position of the professor. I understand why he only took the comparables because of the changes in forecasts, which I find was correct, the forecasts kept changing.”

The parties agreed to settle the matter in late June 2020, with Promega acquiring the plaintiffs’ shares for more than $300 million, a sizeable premium over the pre-suit redemption price and one of the largest recoveries in a shareholder oppression case in the United States. Professor Zmijewski was supported by a team in CRA’s Chicago office led by Pavel Nikolov.