3 former shareholders of shoe firm get $4M

BANGOR – Three minority shareholders of the former Penobscot Shoe Co. in Old Town took advantage of a little-used state law to successfully sue the company and be awarded about $4 million because they believed their shares were involuntarily taken from them.

The so-called dissenters’ rights statute allows minority interests in a merged company to obtain a judicial determination of “fair value” when their shares are involuntarily taken in a merger, according to Bangor attorney Charles E. Gilbert III, who represented one of the three shareholders. Samuel W. Lanham Jr. represented the other two shareholders.

Rarely is a request made for a fair-value determination in the state’s courts because so few publicly traded companies have headquarters in Maine, Gilbert said. A number of publicly traded companies with operations in Maine are headquartered in Delaware, the country’s haven for most Fortune 500 companies.

On Friday, Penobscot County Superior Court Justice Jeffrey Hjelm awarded the shareholders more than $2.3 million for their shares, plus another 8 percent in compound interest for an estimated total of about $4 million. The three shareholders were not affiliated with the company, but were outside individuals who “thought Penobscot Shoe was an outstanding company to invest in,” Gilbert said.

The shareholders are Joseph Nerges of Scranton, Penn., and Robert McCulloch and Anne Buta of Salem, Ohio.

The amount awarded is a “fair value” of $15.87 per share, about 35 percent higher than the $11.75 per share received by other shareholders who voluntarily tendered their interests in January 2000, when Penobscot Shoe merged with the Daniel Green Co. of New York. The Kagan family of Bangor was the majority shareholder, at 55 percent, and 127 other individuals had stakes in the company. All but the three dissenters agreed to tender their shares in the merger.

Last year, Daniel Green changed its name to Phoenix Footwear and moved its corporate and administrative offices from Old Town to Carlsbad, Calif. The company still maintains a warehouse in Old Town.

Hjelm’s 63-page decision was being “studied” by the shareholders’ attorneys Friday. Gilbert said it is unclear whether he will appeal the decision, even though his client won. Gilbert said Hjelm “excluded some evidence we thought should be heard,” which could have resulted in an even higher judgement.

Phillip Buckley, an attorney for the shoe company, said Friday he was “not authorized by his client to make any comment.”