Dole Food Company, Inc. (NYSE:DOLE) definitely deserves a slot in the watch list of punters these days. Come this April, close to $1.7 billion in cash will be infused into this company which produces, markets, and distributes fresh fruits and fresh vegetables. By that month, Dole would have completed the sale of its Asian fresh produce and its worldwide packaged foods operations to the Itochu conglomerate of Japan. Itochu’s purchase includes the exclusive rights to the Dole brand on Asian fresh produce and packaged food products worldwide.
Dole retaind its fresh fruit operations in North America, Latin America, Europe, and Africa, as well as its entire fresh vegetable business in North America. The completion of the sale will turn Dole into a more focused company retaining a significant scale in fresh fruits and fresh vegetables with a rich asset base and a $4.2 billion range in overall revenue, according to Dole Chairman David H. Murdock. To complete the sale, Murdock reassumed the CEO role in the company, a post he held between 1985 and 2007. Former Dole CEO David DeLorenzo and the company’s ex-CFO Joseph Tesoriero are moving to Itochu as part of the purchase deal.
Formidable war chest
For Dole, a substantial debt reduction is one immediate result of the transaction. The company will use part of the $200 million non-refundable cash deposit, which Itochu already paid in cash, to repay debt. The deposit will also be used for general corporate purposes and some expenses related to the transaction. Besides debt reduction, the sale will likewise result in cost savings of $50 million resulting from the streamlining of Dole Food Company, Inc. (NYSE:DOLE)’s corporate structure and global personnel.
All told, the sale puts Dole in a strong financial position to explore growth opportunities in the fresh produce business. Furthermore, if the expressed company intention to sell 21,800 acres of its Hawaii farm land holdings materializes, Dole’s war chest indeed would look even more formidable. Proceeds from this planned sale range from $175 million to $200 million.
What to expect
More acquisitions could be in Dole Food Company, Inc. (NYSE:DOLE)’s future. In October 2011, the company acquired SunnyRidge Farm, which contributed to a 10% increase in fresh vegetable sales during the 2012 third quarter. In March 2012, Dole acquired Mrs. May’s Naturals, from which Dole drew successful product launches in this year’s third quarter.
For the nine months ending October 6, 2012, the company posted net revenues of $5.03 billion, down from the $5.69 billion of the comparable previous nine-month period. Its 2012 nine-month net income totaled $68.8 million ($0.78 EPS), up from $38.1 million ($0.43 EPS) a year earlier.