Estera Trust (Jersey) Ltd & Anor v Singh & Ors

In fixing the price for a compulsory purchase of minority shares, the court must identify market value and any marriage value released by combining the holdings. Market value is the best estimate of the price likely to be agreed by prudent, well-informed parties on the valuation date. It must not be increased to reflect a percentage chance of a higher bid. A market value is not adjusted according to the particular value of an asset to its existing owner. A minority discount does not automatically create an equal and opposite premium for majority holdings. Under Companies Act 2006, s 996, payment terms and discretionary interest must balance the sellers’ entitlement to prompt payment against the company’s legitimate financial and commercial interests.

The court had previously ordered Jasminder Singh and Edwardian Group Limited to purchase the shares held by Estera Trust (Jersey) Limited and Herinder Singh, representing just under 20% of the Company. The first judgment directed that the price should comprise the market value of the petitioners’ shares plus one half of the marriage value released by combining their shares with the existing holding controlled by Mr Singh.

This second part of the trial determined the valuation inputs, including the hotel assets, the existence of any portfolio premium, the net asset value of the Company, minority and control discounts, and the timing and terms of payment. The central issue was the fair price payable for the petitioners’ shares as at 30 June 2014.

1. Valuation formula. The C tranche had to be valued as the aggregate 25.17% holding, rather than by adding the B tranche to a negotiated price for the A tranche. Otherwise only part of the marriage value would enter the formula and the petitioners would receive less than the intended one half.
2. Hotel assets. The court preferred Mr Stoyle’s individual hotel valuations, subject to increasing the Leicester Square contingency allowance to 7.5%. It rejected a 10% portfolio premium. The evidence established only a speculative possibility of such a premium. Market valuation required the best estimate of the bid likely to be agreed, not a weighted addition for a possible higher bid.
3. Market value and net assets. There is one market value for an asset, rather than different values according to the identity or intended use of the owner. The Leicester Square site therefore was not uplifted for avoided acquisition or disposal costs or developer’s profit. Cash and stock were separate Company assets and were not included in the hotel valuations. Doubt concerning adjustments to audited liabilities was resolved against the Company because it had failed to provide proper transparency.
4. Share discounts. A 45% discount was applied to the A tranche. The court rejected a separate “realisation benefit” which risked double counting the prospect of a future pro rata exit. A 10% discount applied to the B tranche and a 2.5% discount to the C tranche. A minority discount did not require an equal and opposite majority premium.
5. The resulting price was £137.4 million, comprising £97.9 million for A and one half of marriage value of £79.2 million. The first payment was fixed at £22.5 million within 28 days, with the balance payable within six months. Under Companies Act 2006, s 996, interest was awarded at 1% above Bank of England base rate from 5 July 2018 to judgment and 4% above base rate thereafter until payment.

The judgment was the second part of the same first-instance proceedings. The earlier judgment, [2018] EWHC 1715 (Ch), had granted relief and ordered the purchase of the petitioners’ shares. This judgment determined the price and ancillary payment terms.