Calculation of the cash dividend in a squeeze-out based on the net asset value (BayObLG, ruling of 23 August 2023 - 101 W 184/21)

In a recently published decision, the BayObLG (Bayerisches Oberstes Landesgericht), acting as the appeal court in the course of appraisal proceedings, confirmed the prevailing view that the recurring cash compensation (“cash dividend”) for minority shareholders in a squeeze-out can be determined on the basis of a company valuation derived from the net asset value (NAV), provided that the company is an asset-managing company (see also Higher Regional Court (OLG) Frankfurt a. M., decision of 3 November 2020 - 21 W 76/19; OLG Karlsruhe, decision of 25 May 2020 - 12 W 17/19; OLG Munich, decision of 12 July 2019 - 31 Wx 213/17).

The company in question is a formerly listed real estate company whose shares were initially admitted to the regulated market and were still listed on the open market of the Munich Stock Exchange until 30 June 2016. The valuation expert determined a value of approx. EUR 133 per share for the recurring cash compensation of the minority shareholders as part of the squeeze-out under the German Stock Corporation Act (AktG) pursued by the main shareholder using the NAV method as at 22 March 2017. The main shareholder offered a cash dividend of EUR 136 per share, which the auditors appointed by the Munich Regional Court I deemed appropriate. Minority shareholders then brought appraisal proceedings before the regional court with the aim of obtaining a higher compensation, in the course of which a court expert again confirmed the appropriateness of the amount offered. Some of the unsuccessful minority shareholders then appealed to the BayObLG against the regional court's dismissal.

The minority shareholders were also unsuccessful before the BayObLG with their various objections to the appropriateness of the cash dividend. In its decision, the court confirmed the application of the NAV method. The value of an asset-managing company (here: real estate company) results primarily from the earning power of its capital investments, which in turn is largely reflected in their market values (i.e. NAVs). Based on this, the value of such a company is in principle the sum of the market values of its investments (e.g. real estate) plus the value of other assets and less the value of the liabilities. Each asset has to be considered separately, whereby the individual valuation could be carried out according to the appropriate method (e.g. a comparative value method). The court also rejected the complainants' other objections. In particular, neither the stock market price nor previous acquisitions of shares, in particular by the main shareholder, were to be taken into account for the valuation, even if the previous acquisitions had taken place in a factual and temporal context with the squeeze-out.

The decision and the reasoning of the BayObLG seems right in principle. The NAV method is undoubtedly a suitable valuation method for asset-managing companies that is recognised in economic valuation theory, and is also commonly used in practice to determine the company value, which ultimately can only ever be an approximate value in the context of a (judicial) estimate. Since the termination of the listing on the open market apparently took place prior to the three-month reference period for determining the VWAP, the stock market price - irrespective of the more recent case law on this topic by the Federal Supreme Court (see BGH, decision of 21 February 2023 - II ZB 12/21) - was quite rightly disregarded for the determination of value. The court also correctly disregarded the pre-acquisition prices paid. It is recognised that the consideration of pre-acquisition prices is, in principle at least, not required under constitutional or stock corporation law, because the price paid - and the individual marginal benefit received - by the main shareholder for individual shares or share packages does not (necessarily) correspond to the value of the shareholdings held by outside shareholders or the enterprise value.