Is Dole Food Company, Inc. (DOLE)’s Offer Cheap?

Page 1 of 2

Dole Food Company, Inc. (NYSE:DOLE) has recently received a buyout offer from its 90-year-old chairman and CEO, billionaire David Murdock. He would like to acquire around 60% of the company at around $12 per share in cash, valuing Dole Food at around $1.5 billion in enterprise value. The offer came in at around 18% premium to its pre-offer trading price. Interestingly, Dole Food’s share price has moved above Murdock’s offer, to nearly $12.50 per share. Is $12 per share fair for Dole Food? Let’s find out.

Divesting the packaged foods business to Itochu

Dole Food Company, Inc. (NYSE:DOLE)Dole Food Company, Inc. (NYSE:DOLE) has a history dated back to 1851, and since then has become the leader in producing and distributing fresh vegetables and fresh fruit. Recently, Dole Food has restructured its business by divesting its packaged-foods business to Itochu for around $1.7 billion. After the deal, the company expects to have a lower net debt/adjusted 2013 EBITDA at around 2.5, a much stronger balance sheet position. The debt reduction will save Dole Food a lot of interest expense payment. The adjusted 2013 EBITDA expected to come in at around $150 million to $170 million. Moreover, the company is trying to sell around 20,600 acres of land in Hawaii where it has no farming activities, with the total expected value of $175-$200 million.

Announced repurchase plan then suspended it

A month after Dole Food Company, Inc. (NYSE:DOLE) completed the divestment, it announced that it would repurchase up to $200 million of the company’s shares. COO Michael Carter was bullish about the share repurchase program, he said,

Our new capital structure was designed and implemented to provide needed flexibility to enhance shareholder value, as well as to meet future competitive challenges as we continue to launch the new Dole. We believe the share repurchase program will enhance shareholder value.

However, at the end of May, Dole Food Company, Inc. (NYSE:DOLE) suspended its share repurchase program. The company mentioned that it needs around $165 million to acquire three newly built refrigerated container ships for its operation in the West Coast. Right after the share buyback suspension announcement, Dole Food dropped by 6%.

At $12 per share, Dole Food Company, Inc. (NYSE:DOLE) is valued at around 10.2 times its forward EBITDA. EBITDA multiple represents the ratio of Enterprise Value divided by Earnings Before Interest, Taxes, Depreciation and Amortization. It takes into account the relationship of the market value, cash and debt level, compared to the firm’s cash flow position.

Its peers are much more cheaply valued

Compared to its peers Chiquita Brands International, Inc. (NYSE:CQB) and Fresh Del Monte Produce Inc (NYSE:FDP), Dole Food Company, Inc. (NYSE:DOLE) is the most expensively valued on the market. Chiquita Brands, at around $10.90 per share, is worth around $507.3 million on the market. The market values Chiquita Brands at around 7 times its forward EBITDA. Chiquita has been in the business restructuring process under its new CEO Edward Lonergan. He has been trying to lower the cost with the target margin of around 4% for the bananas segment and 7%-8% for the salads segment. Chiquita Brands International, Inc. (NYSE:CQB) pointed out several opportunities to drive 2013 operating performance, including banana contracts to increase U.S. market share growth and Midwest salad facilities consolidation to reduce the operating costs. Chiquita Brands’ EBITDA might reach $175 million–nearly 3 times higher than the EBITDA of $59 million last year.

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

50 Crazy Facts About Japan You Won’t Believe

Top 10 Least Expensive Hybrid Cars to Save the Planet With

The 10 Biggest ‘Gate’ Controversies in History

The 10 States with the Highest Nursing Shortages Leaving Their Hospitals Depleted

The 10 Best Value Investment Blogs that Every Investor Must Read

The 6 Cheapest Boarding Schools in Europe 2015

The 5 Most Expensive Cars To Insure in the World

The 10 Most Common Genetically Modified Foods

10 Self-Made Billionaires Who Came From Nothing

The 10 Most Expensive Cities to Live in North America

The 13 Most Expensive Headphones in the World to Represent

The Top 20 Wealthiest Soccer Teams in 2014

4 BuzzWorthy Cannabis Stocks And Some Smoking Derivative Plays

The 10 Healthiest Fast Food Chains in America to Dine At

The 5 Most Expensive Cat Food Brands You Can Spoil Your Kitty With

The 6 Best eCommerce Platforms for Small Businesses

The 10 Worst Mistakes an Entrepreneur Can Make

The 5 Most OP Characters in League of Legends to Carry Games and Crush Foes With

The 5 Best Foods to Eat Before Running that Will Help You Pound the Pavement

10 Glaring Plot Holes in The Walking Dead that a Zombie-Filled Bus Could Drive Through

The 5 Biggest Celebrity Stoners Who Love Their Reefer

The 10 Most Overrated Movies Of All Time by Out-of-Touch Critics

Top 6 Least Expensive Cruise Destinations For 2015 that Will Take You to Paradise

10 States with Lowest Substance Abuse Rates in America

The 14 Most Watched TV Finales Ever

The 10 Best Selling Role Playing Games of All Time for PC

10 Most Influential Papers In Economics

Top 8 Biggest Charities in the US

10 Worst Celebrity Career Moves Ever

Top 10 Best Paid Tennis Stars in the World

10 Cities with High Demand for Nurses

6 of the Worst Greeting Card Messages Ever Crafted

How to Make Money in ArcheAge and Build Your Empire

10 Foods To Eat To Lower Cholesterol Levels

The 10 Most Hated Television Characters of All Time

The 30 Worst Halloween Costume Ideas Ever Brought to Horrible Life

10 Vocational Skills in Demand Today with Jobs Waiting to be Filled

10 Best Places to Visit in Central and South America

The 10 Greatest Empires in History Which Nearly Conquered the World

The 6 Cheapest Boarding Schools In America 2015

5 Clear Reasons LoL is Better than DotA, Continues to Rule MOBAs

The Only 9 Teams with a Chance to Win the Super Bowl

The 15 Most Common Phobias in America that Induce Fits of Panic

Top 6 Least Expensive Tourist Destinations in 2014

Jim Goetz, Peter Fenton, Jim Breyer: Top 6 Venture Investors for 2014

Top 15 Billionaires in 2014

5 Pitfalls To Avoid When Buying a Franchise

Top 20 Medical Schools in the US – 2014 Rankings

4 Business Strategies that Turned Jamie Oliver into the World’s Richest Chef

6 Qualities That Make You A Good Team Player

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!