The Irish High Court ruled on Wednesday that sales of shares in fruit importer Fyffes by marketing and distribution group DCC Plc in 2000 were lawful, sending DCC's shares higher and Fyffes' lower.
Fyffes took legal action against DCC, its Chief Executive Jim Flavin - a former Fyffes director - and two DCC subsidiaries after they sold their shares in the fruit distributor a month before the group made a profit warning in March 2000.
Fyffes, one of the world's top five fresh produce distributors, had argued Flavin possessed company information, including a worse-than-anticipated quarterly trading forecast, that was not generally available when the sales were made.
However, Justice Mary Laffoy said in her 274-page written ruling that the information was not price sensitive.
"The plaintiff has not established that, if the information contained in the November and December Trading Reports was generally available on 3rd, 8th and 14th February, 2000 (when the shares were sold), it would have been likely to materially adversely affect Fyffes' share price," she wrote.
Fyffes shares extended early losses after the ruling, falling 3 percent to 2.26 euros by 1300 GMT. They traded at around 2.30 euros before the ruling. DCC stock was up 6.3 percent at 17.64 euros from 16.60 euros before.
"This is a disappointing result for Fyffes as they may have to bear DCC's court costs which, in addition to their own costs, could total around 20 million euros ($23.8 million)," said one analyst who declined to be identified.
Laffoy did not refer to costs in the ruling.
Fyffes Chairman Carl McCann said the company, whose brands also include Outspan and Cape, would consider appealing.
DCC, which always denied the allegations, welcomed the ruling and CEO Flavin told reporters outside the court he did not believe DCC would be liable for any tax over the sales.
Davy Stockbrokers' analyst Florence O'Donoghue said investors had been cautious about investing in DCC while the court case was underway.
"It's obviously very good for DCC in that it's been an overhang for a couple of years now," said O'Donoghue, who has a 12-month price target of 20 euros and "buy" recommendation on the stock.
Fyffes' case against DCC began in Dublin's High Court last December and concluded in July after 87 days of hearings.
The fruit importer argued that in January 2000 Fyffes directors had a forecast of the group's trading position for the first quarter of the financial year ending October 31, 2000 which indicated a loss for the quarter of 2.7 million euros ($3.2 million) compared with a budgeted profit of 4.7 million euros.
In February 2000, DCC sold a total of 31 million Fyffes' shares at a profit of 85 million euros.
After the sale, Fyffes share price continued a recent rise.
However, after Fyffes issued a profit warning in March 2000, its stock price dropped 25 percent in two days.
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