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Castle & Cooke Open to Offers

Real estate: Directors' panel OKs $18.50-a-share bid by chairman. But it will consider other proposals.


A special committee of directors at real estate developer Castle & Cooke Inc. said Monday that it approved a higher buyout from a company controlled by Castle Chairman David Murdock, but left the door open for the possibility of a better offer from a third party.

The committee agreed to an $18.50-per-share bid for the 73% of Castle that Murdock's Flexi-Van Leasing Inc. doesn't already own. That's 8.8% higher than the $17 Flexi-Van offered March 29. Castle owns virtually all of the Hawaiian island of Lanai as well as various home-building and commercial real estate interests on Oahu and in the southwestern United States.

Los Angeles-based Castle valued the deal, including the shares FlexiVan owns and the assumption of debt, at $600 million. Its shares rose $1.19, or 7%, to close at $18.25 on the New York Stock Exchange on Monday.

But the question remains whether the new offer is high enough to mollify other big holders of Castle's stock, including an investment group organized by the four sons of former CBS Inc. chairman and longtime Loew's Corp. chief Laurence Tisch.

The Tisch brothers own nearly 10% of the company, giving them the largest block of stock after Murdock. Two investment companies are next, Franklin Resources with 9.6% and Dimensional Fund Advisors with 7.1%.

The special committee, made up of four board members who are not company executives, said it would consider "any potentially more advantageous proposal" if it arrives before June 30.

"It is clear that the land and the assets of the company are worth more in the long haul," said analyst Stephen Percoco of Lark Research in Rahway, N.J. "The question is, what are the risks someone has to take today to wait for the long haul."

Sutro & Co. analyst Craig Silvers estimated the underlying value of the company at $29 a share March 30 and the book value an additional 10% higher. Nonetheless, the offer by Kenilworth, N.J.-based Flexi-Van, a company that leases truck chassis, stands 57% higher than Castle's recent low of $11.75 reached Feb. 2.

For the deal to go through, Murdock, 77, must win the votes of a majority of shareholders controlling the stock he doesn't own.

"I wouldn't be surprised to hear about other proposals," said one shareholder. "This price is still below what the company valued itself at in 1998 when it bought back shares for $19."

Making a bid slightly higher might be enough, according to analysts. Any bidder would have to set the price high enough to coax Murdock to part with his 27% of the company.

Castle owns 88,000 acres, or 98% of Lanai, which is sparsely developed. It has built two resorts with a total of 351 rooms on the tropical island, which has several pristine snorkeling sites. But much of the island is covered with pineapple fields, low-lying thickets of brush and small trees. It rises to a peak of 3,370 feet.

The company's prospects have improved with budding signs of a turnaround in Hawaii's economy. Its business there accounts for about two-thirds of its revenue. Castle, which Murdock spun off from Dole Food Co. in late 1995, saw earnings rise 25% to $13.5 million and revenue rise 9% to $316.9 million for the year ended Dec. 31.

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