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Dole Food going public again with $500-million stock offering

The produce giant owned by L.A. billionaire David Murdock can use the cash to pay down debt, invest in new products or make acquisitions.

August 15, 2009|Jerry Hirsch

In what analysts said was an example of stirring in the moribund market for initial stock offerings by large companies, produce giant Dole Food Co. filed regulatory paperwork Friday to sell shares to the public.

Dole, owned by Los Angeles billionaire David Murdock, said it planned to raise $500 million in the stock sale. It didn't indicate the share price it hoped to get.

It will be the second initial public offering for Dole. In 2003, Murdock took the company private in a transaction that valued the business at $2.5 billion. Taking it public again would provide liquidity for the 86-year-old businessman and give Westlake Village-based Dole cash to pay down debt, invest in new products or use for acquisitions.

The Dole offering is big news in the produce world, said Jim Prevor, editor in chief of industry website PerishablePundit.com.

Prevor said Dole is the nation's No. 1 seller of fresh fruits and vegetables including bananas, pineapples and fresh-cut salads. It's also a major producer of pineapple juice and canned pineapple.

"If the company winds up raising a lot of cash it will be a much tougher competitor in the produce business," he said.

At least some of the proceeds from the offering will be used to pay down debt. Dole has been on an aggressive debt-reduction program, reducing its borrowings by $145 million during this year's second quarter and by $480 million over the last five quarters. Its current debt stands at about $1.9 billion.

The offering will include both newly issued shares and shares owned by Murdock, according to documents filed Friday with the Securities and Exchange Commission.

Wall Street started to see renewed interest in such public stock offerings in June, said Paul Bard, head of research for Renaissance Capital in Greenwich, Conn.

The company, which tracks deals, said 12 companies filed plans for offerings in July, the most since last August. Six more have filed plans so far this month and more are in the offing, Bard said. Investors in these deals have done well, he added.

"Our index of shares of new offerings has risen 34% this year," Bard said.

Whether potential shareholders will view Dole as a good investment remains to be seen, said Scott Mushkin, an analyst with Jefferies & Co. in New York.

Mushkin pointed out that Murdock has a reputation for running the company as a private business, which could make it a tougher sell to investors. But he noted that "they don't do IPOs like this unless the business is running well."

For the six-month period that ended June 20, Dole earned $123 million on sales of $3.3 billion.

Murdock is known as a quirky billionaire who, among a variety of business ventures, owns almost all of the Hawaiian island of Lanai. The 1985 death of his wife, Gabriele, convinced him that their high-fat, high-calorie diet of prime rib and potatoes contributed to her illness. He then adopted a fish and vegetarian diet and credits the change for his longevity.

The son of a traveling salesman who didn't complete high school, Murdock was raised in a household where "if it wasn't cooked in bacon grease, it didn't taste good," he told The Times in a 2006 interview. He's known for banning hamburgers in the cafeteria of Dole's corporate headquarters and for opening a 20-acre resort and health institute in Westlake Village. Guests can take a "medical vacation" at his hotel and get a snapshot of their current state of health and advice from professionals on how best to prevent illness.

Murdock is Dole's sole individual shareholder and serves as its chairman. The company paid him $2.7 million in salary and bonuses last year. He became chief executive in 1985 but in 2007 relinquished the job to David DeLorenzo.

The billionaire has a history of gaining control of public companies and then taking them private in what many investors believed were lowball offers. In the Dole transaction, he offered about $2.3 billion, including the assumption of $1 billion in debt, but had to increase his offer to $2.5 billion after shareholders complained.

In 2000, Murdock bought Los Angeles-based developer Castle & Cooke using a similar strategy, which was how he obtained the Hawaiian island of Lanai. Shareholders complained about his initial offer, forcing him to make a series of successively higher bids. Even after he completed the $615-million deal, several shareholders used an unusual Hawaiian securities law to protest the Castle & Cooke deal, eventually reaching a confidential settlement of their claims.

But holders of Dole debt should view the equity offering as a positive development, according to Fitch Ratings.

"It could result in a meaningful reduction in the company's debt and reduce its overall financial leverage," said Wesley Moultrie II, an analyst at the corporate credit rating service.

Fitch has five ratings for various segments of Dole's debt, ranging from C to B-plus. All put Dole's borrowings in the speculative high-yield debt category, Moultrie said.

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