Opinion ID: 2570185
Heading Depth: 1
Heading Rank: 10

Heading: Control Premiums

Text: {47} The Peters Group argues that the district court should have added a control premium of 40% to the total business value of NMBIC, which would have increased the fair value of their shares for purposes of appraisal and buy-out. The Court of Appeals aptly explained control premiums as follows: A control premium is [a] premium paid for shares carrying the power to control a corporation. A control premium typically refers to the additional amount a buyer would pay for a block of shares that would give the buyer control of a corporation. More broadly considered, the determination of an appropriate control premium adjustment entail[s] considering any number of factors including, whether the sale ends a long-standing controversy over control of the company, whether the sale involves a substantial percentage of the corporation's stock, whether the sale would give the buyers the certainty of ongoing control, and whether the buyers could afford to pay a substantial premium. Therefore, depending on the facts of a particular case ... control premiums may or may not be a relevant factor in the fair value analysis. Peters Corp., 2007-NMCA-065, ¶ 16 (internal quotation marks and citations omitted) (first two alterations in original). {48} The Peters Group reasons that, under one of the methods used by their expert to arrive at a valuation of their shares, the guideline publicly traded company method, a minority discount was necessarily built into the valuation of their shares because the data on public trades are data on trades of minority shares. [2] Thus, they argue that the court had to add a control premium to offset that built-in discount. The district court rejected expert testimony to that effect, awarding fair value without including either a minority discount or a control premium. {49} The Court of Appeals observed that New Mexico law supports a case-by-case assessment of whether fair value should be adjusted for control premium, and that New Mexico courts have deferred to the fact finder in upholding or denying adjustments to fair value for control premium. Id. ¶ 18. In this case, both the district court and the Court of Appeals recognized that sale of control was not at stake. Id. ¶ 20. Although the Peters Group were part of the control group as signatories to the Shareholder Agreement and the BBV Agreement, they were minority shareholders within that group and within NMBIC as a whole. Id. ¶ 21. Therefore, the Peters Group had no real expectation or ability, on their own, to control the NMBIC Board of Directors or other shareholders. Id. The Court of Appeals also noted that the district court's decision not to include a minority or marketability discount in its valuation made the addition of a control premium to offset any theoretically alleged built-in discount unwarranted. Id. Thus, the Court of Appeals held that the evidence presented in this case supported the district court's decision not to include an adjustment for control premium in its determination of fair value of the Peters Group's shares. We agree. In addition, our cases have long held that it is the prerogative of the finder of fact to accept or reject expert testimony and to select which parts of the witnesses' testimony to believe or disbelieve. See, e.g., Gutierrez v. Albertsons, Inc., 113 N.M. 256, 261-62, 824 P.2d 1058, 1063-64 (Ct.App.1991) (indicating that the fact finder may select which portions of the witnesses' testimony to believe, provided that the fact finder may not fragment the testimony to the point of distortion); Sanchez v. Molycorp, Inc., 103 N.M. 148, 153, 703 P.2d 925, 930 (Ct.App.1985) ([T]he opinions of an expert even where uncontradicted, are not conclusive on facts in issue and the fact finder may reject such opinion in whole or in part.).