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8 years ago
UPDATE 1-Dole IPO prices for $12.50/shr, below range
October 22, 2009 / 11:36 PM / 8 years ago

UPDATE 1-Dole IPO prices for $12.50/shr, below range

4 Min Read

* Dole sells 35.7 mln shares, raising $446.4 mln

* High debt load risky, considering low margins-analysts

* Shares to start on Friday on NYSE (Updates with IPO pricing, paragraphs 1-4)

By Phil Wahba

NEW YORK, Oct 22 (Reuters) - Shares of Dole Food Co Inc DOLE.N, the world's largest producer and seller of fresh fruits and vegetables, priced at $12.50 per share, below expectations, in the company's initial public offering.

Dole sold 35.7 million shares as expected, raising $446.4 million on Thursday. Shares are set to begin trading on the New York Stock Exchange on Friday under the symbol "DOLE."

Dole had expected shares to price for between $13 and $15 each.

Despite having a household name, analysts said investors could be concerned that the service on Dole's $1.9 billion debt load could be a worrisome drag on its cash flow and profit margins.

"There's no wiggle room for the company," Francis Gaskins, president of the research firm IPO Desktop.

In the half year ended June 20, Dole had interest expenses of $74 million, which Gaskins said was too high in relation to its operating income of $131 million.

"Dole has low margins because it's a food company -- so if business falls, it might not be able to even make its interest payments," Gaskins said, and trip loan covenants.

In 2008, Dole started selling off "noncore assets" in an effort to lower its debt, and said in the filing that it had paid down $480 million of debt in the 15 months leading up to June 20.

For the first half of 2009, the company's sales fell 11.1 percent to $3.3 billion and profits slid 18.3 percent. It had 2008 revenue of $7.6 billion and net income of $123 million.

Investor David Murdock bought a controlling interest in Dole's predecessor company, Castle & Cooke Inc, in 1985, and became chairman and chief executive. The company changed its name to Dole in 1991, according to the securities filing.

Murdock, who took Dole private in 2003 in a $2.5 billion deal, will still own 59 percent of Dole's shares after the IPO, according to the filing.

Dole is expected to use the net proceeds to pay down its debt, which is rated B-minus, six levels below investment grade.

Rivals Chiquita Brands International Inc CQB.N had revenue of $3.6 billion and a net loss of $323.7 million in 2008, while Fresh Del Monte Produce Inc (FDP.N) had revenue of $3.53 billion and net income of $157.7 million.

Standard & Poor's has a B rating on Chiquita Brand's debt, which stood at about $695 million as of June 30; the agency also has a BB rating on Fresh Del Monte's outstanding debt which was $335 million as of June 26.

"People are very concerned with debt right now-- they are once again seriously looking at financials," said Scott Sweet, a senior managing partner at advisory firm IPO Boutique.

The IPO is being managed by Goldman Sachs & Co, Bank of America Merrill Lynch, Deutsche Bank and Wells Fargo. The underwriters will have the option to buy another 5.4 million shares. (Reporting by Phil Wahba, editing by Leslie Gevirtz)

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