Dole's 90-year-old CEO offers to take company private

Tue Jun 11, 2013 1:12pm EDT

A worker at Dole Food Company scoops up cacao beans at the company's Waialua coffee and cocoa farm on the North Shore of Oahu, in Hawaii November 9, 2011. REUTERS/Yuriko Nakao

A worker at Dole Food Company scoops up cacao beans at the company's Waialua coffee and cocoa farm on the North Shore of Oahu, in Hawaii November 9, 2011.

Credit: Reuters/Yuriko Nakao

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(Reuters) - At an age when many 90-year-olds are satisfied with playing gin rummy in a nursing home, Dole Food Co Inc DOLE.N Chief Executive David Murdock is planning his next big deal.

The billionaire, who already owns 40 percent of one of the world's largest producers and marketers of fruit and fresh vegetables, made an offer on Tuesday to buy out the rest of the company in a deal that values it at just over $1 billion.

Dole shares jumped as much as 22 percent to $12.44, well over the offer price of $12 per share, suggesting that some investors expect a higher bid for the company, which has posted losses for the last three quarters.

Analysts said Murdock may well have to raise his offer to clinch the deal, but that another bidder was unlikely.

"It's a good starting bid and it's a sufficient bid to commence negotiations with the independent committee of the board," said Roy Behren, managing member at Westchester Capital Management LLC, which owns 4.25 percent of Dole and is its fourth-biggest shareholder. Murdock is the biggest.

The proposed deal for Dole, which traces its roots to pineapple plantations set up in Hawaii in the mid-1800s, is the latest in a string of management-led bids, topped by Michael Dell's $24 billion offer for the computer company he founded.

"We see this proposed offer as an attractive transaction that is likely to proceed at or relatively close to this price level, especially given Murdock's strong ownership position, CEO role, and apparently strong personal liquidity position," Jonathan Feeney of Janney Capital markets said.

Dole's intrinsic value is around $9.46 per share, according to StarMine, a unit of Thomson Reuters. That is about 7 percent below the stock's Monday close and 21 percent below Murdock's offer. StarMine's intrinsic value estimates the cumulative annual growth rate in the coming 10 years using a blend of its own models and analyst estimates.

BACK IN THE SADDLE

Murdock, who is also Dole's chairman, returned as CEO in February after David DeLorenzo left to run two businesses sold by Dole to Japan's Itochu Corp (8001.T).

A high school dropout who ran the company as CEO from 1985 until 2007, he took Dole Foods public as chairman in 2009 - the same year, according to a Forbes profile, that he finally earned his high school diploma.

Murdock, who made his fortune in real estate, picked up Dole when he took over its Hawaiian parent Castle & Cooke in 1985.

The nonagenarian told the New York Times in 2011 that he wanted to live to be 125, pinning his hopes on a strict diet, daily exercise and a lifestyle free of pills or supplements. He also admitted to a "dictatorial" streak. (link.reuters.com/bar78t)

The 213th richest American -- with a net worth of $2.4 billion, according to Forbes -- Murdock was in the news last year when he sold his 98 percent ownership of Hawaii's sixth-largest island, Lanai, to Oracle Corp ORCL.O co-founder and CEO Larry Ellison for a reported $500 million.

His latest play follows the sale of Dole's packaged foods and Asia fresh produce businesses to Itochu for $1.7 billion, paring the company's size by a third. Revenue in 2012 was $4.2 billion.

Dole is now left with its fruit and fresh vegetables business in North America and its fruit businesses in Latin America, Europe and Africa. About 70 percent of its revenue comes from fresh fruit.

The company, like rival Chiquita Brands Inc (CQB.N), has been struggling with volatile demand and low prices for bananas, its biggest-selling product.

Dole's shares fell sharply last month when the company announced that it had indefinitely suspended its share repurchase program, less than a month after announcing it, and would instead buy three new specially built refrigerated container ships for $165 million.

Dole, which had $101 million in cash on hand as of March, said it would set up a special committee of independent directors to consider Murdock's offer, which has an enterprise value of $1.5 billion.

The offer represents a premium of about 18 percent to Dole's closing stock price on Monday. The shares were up 21.5 percent at $12.39 in early afternoon trading on the New York Stock Exchange.

Prior to the bid, the stock had fallen 32.7 percent since touching a life-high of $15.16 in September, when it struck the deal with Itochu.

Murdock said Deutsche Bank would advise on the transaction and that he had received a "highly confident" letter from the lender on the financing for the deal.

(Editing by Saumyadeb Chakrabarty and Ted Kerr)

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