Dole Food Co. chairman and chief executive officer David Murdock offered about $645 million to buy out other shareholders of the fresh fruit and vegetable producer, saying stock markets are too concerned with short-term results.
Murdock will pay $12 a share in cash for the 60 percent stake in Westlake Village, California-based Dole that’s not owned by him or his family, he said today in a statement. The offer is 18 percent more than the company’s closing price on June 12. Dole rose 22 percent to $12.46 in New York, the biggest gain since it resumed public trading in 2009.
“Even though Dole’s equity is trading above the offer price, we believe there is a relatively high probability of completion,” Hale Holden, a New York-based analyst for Barclays Plc, said in a note today.
Murdock, 90, who took over as CEO in February, is reprising his 2003 role in taking the company private. Operating Dole as a private enterprise will give it more ability to focus on long- term goals “without the concern that a public company must have for the investing public’s short-term expectations,” he wrote in a letter to the board yesterday.
Dole has reported a decline in earnings before interest, taxes, depreciation and amortization for the past three years and the company in May said there may be a fourth annual drop on lower prices for bananas and berries.
Murdock, the company’s largest shareholder and its CEO for 22 straight years through 2007, resumed full control when David A. DeLorenzo left to manage Dole’s packaged-foods and Asian businesses, which were sold to Japan’s Itochu Corp. for $1.69 billion in April.
The CEO’s offer was made late yesterday to directors at Dole, the largest North American supplier of bananas, iceberg lettuce and cauliflower. The board will meet in the next several days to create a committee of independent directors to consider the bid, Dole said in a separate statement.
“We see this proposed offer as an attractive transaction that is likely to proceed at or relatively close to this price level, especially given Mr. Murdock’s strong ownership position,” Jonathan Feeney, a Philadelphia-based analyst at Janney Capital Markets who recommends buying the shares, said in a note.
Murdock has a strong ability to close the transaction given the cash bid, his insider status and the premium to yesterday’s closing price, Feeney wrote.
“There is some room for debate among shareholders about a higher longer-term value for the company,” Feeney said.
Murdock hired Deutsche Bank AG to advise on the transaction and said he received a “highly confident” letter from the bank regarding financing for the bid.
The CEO’s bid “contemplates” the negotiation and execution of a binding agreement by July 31 and acceptance by investors owning a majority of the stock Murdock doesn’t control, as well as approval from a committee of independent directors, according to his statement.
The deal values the company at $1.5 billion, including about $440 million of net debt, Scott A. Griswold, a spokesman for Murdock, said in a phone interview. The bid is equivalent to 10.2 times projected Ebitda. The median multiple of the 10 bids valued at $100 million or more that were made for comparable food companies in the past 12 months was 12.5, according to data compiled by Bloomberg.
Chiquita Brands International Inc. trades at about 7 times estimated Ebitda while Fresh Del Monte Produce Inc. trades at 7.8 times estimated earnings, making them “look even more attractive” relative to Murdock’s offer for Dole, Feeney wrote.
Dole said May 2 that full-year adjusted Ebitda will be about $150 million, the low end of its guidance range, because of a drop in prices for bananas and berries. Adjusted Ebitda fell 12 percent last year to $172 million, largely because of lower prices for North American bananas and higher costs to produce the fruit, the company said in a March 13 presentation.
Murdock was forced to raise his 2003 offer, eventually paying $2.5 billion for the 76 percent of Dole shares he didn’t own, 14 percent more than his original bid. Dole is a smaller company after the sale this year of the worldwide packaged foods and Asian fresh food business, which accounted for 38 percent of the company’s revenue last year.
Dole was founded 162 years ago and operates in more than 90 countries, producing bananas, pineapples and lettuce in Latin America and southeast Asia, according to its website.
For more M&A coverage on Dole, see "Dole Expands Berry Business."