DOLE - Dole Food Company, Inc.

[txlaw]

For you hyper-inflationistas out there (I'm not one of them), this one might be worth monitoring. 

 

Earlier this week, Dole signed a deal to sell their worldwide packaged foods and Asia fresh produce business to Itochu.  They're going to use the cash to pay down debt and refinance at lower rates.  The fresh produce business in NA, Latin America, and Europe remains with DOLE. 

 

Dole claims that they have non-core assets (including land in Hawaii) worth at least $500 million, which seems to reasonable based on a superficial analysis.  These non-core assets net out with the debt that will remain (approximately $260 million) and the underfunded pension, part of which will leave with the Asia business.

 

If Dole can streamline and optimize operations so that they earn a 3% net margin on their remaining $4.2 billion revenue, it will be a decent investment even after the run-up, particularly for people who believe that owning agricultural production/distribution assets will provide an inflation edge for the future, and in light of what Dole claims is a trough in their biggest business (supply of bananas) due to Europe.  The intention is also to shift to more organic and value-added products, and they will probably buy some popular US produce businesses and try to scale for worldwide distribution (e.g., Sunnyridge farms -- one of the larger berry growing and distribution operations in the US). 

 

They also appear to be trying to put legal issues related to pesticide injuries behind them for good, though mass tort risk always exists for a company like this. 

 

I just bought a small position this week and intend to monitor the biz going forward.  If there really is room for substantial improvement in operating metrics, this could be a substantially undervalued business.  It's also interesting that it is majority owned by David Murdock.  The guy is a very interesting dude who seems to be a fanatic about health and extending lifespan (almost as crazy as those paleo guys).

[SI]

I don't disagree with you but a lot in Murdoch's hands at this point. Here are a few of the unanswereds in my mind - any thoughts?

 

-Any sense for the timing of the other 30 mn in cost saves, or has that tgt been back away from essentially by only putting in 20mn in 2013 numbers?

-How much risk is there in the deal?

-What do you think Murdoch does with the money?

-Why did Murdoch settle the collateral call in stock? What was the loan for?

-What is sustainable fcf here?

 

[txlaw]

I don't disagree with you but a lot in Murdoch's hands at this point. Here are a few of the unanswereds in my mind - any thoughts?

 

-Any sense for the timing of the other 30 mn in cost saves, or has that tgt been back away from essentially by only putting in 20mn in 2013 numbers?

-How much risk is there in the deal?

-What do you think Murdoch does with the money?

-Why did Murdoch settle the collateral call in stock? What was the loan for?

-What is sustainable fcf here?

 

All good questions.  And I don't have to answer to any of them. 

 

I said I would monitor, but I actually sold all my DOLE and haven't really kept track of it.  It's just not worth expending the time and resources to monitor, given all the other opportunities available.

[mikazo]

Dole’s Chief to Buy Out Company for $13.50 a Share

 

http://dealbook.nytimes.com/2013/08/12/doles-chief-to-buy-out-company-for-13-50-a-share/?_r=0

[txlaw]

I wish I had followed through on this one.  Oh well.