Fair value in squeeze-out of large mining companies

Vojtěch Bartoš, Marek Vochozka, Jana Janíková

Fair value in squeeze-out of large mining companies

Číslo: 4/2021
Periodikum: Acta Montanistica Slovaca
DOI: 10.46544/AMS.v26i4.10

Klíčová slova: Squeeze-out, fair value, market value, mining companies, stocks, shareholder, DCF Equity

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Anotace: The objective of the paper was to evaluate and propose a method for

the valuation of the purchase of minority interest in the squeeze-out
of large mining companies in the Czech Republic. The research was
conducted on a case of a specific company. An analysis of the
relevant industry, potential, and financial analysis were performed.
Based on these analyses, the method of DCF Equity (Discounted
Cash Flow) was selected as a suitable method that can best capture
and consider the specifics of the company assessed since, within this
method, cash flows are discounted to the owners. The resulting fair
value of the transaction reflects the stock market value to determine
adequate cash settlement in squeeze-out. It sufficiently compensates
the damage caused to the minority shareholder while accepting the
price by the majority shareholder, who is willing to pay up to the
amount corresponding to the benefits the transaction brings to them.
In accordance with the IVS, the selected method is suitable for
squeeze-out transactions, where legislators have the information on
the values of the majority shareholder´s benefit and knows the value
the minority shareholder is willing to accept in squeeze-out.