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Should Dole Shareholders Step Back From Buyout?

Michael Lewis
August 6, 2013

All-things produce supplier Dole Food Company (NYSE: DOLE) has a banner year on the back of an early June buyout offer from its 90-year-old CEO and large shareholder, David Murdock. After a period of success following the initial sale of its Dole Asia business for nearly $1.7 billion in cash and then subsequent cost reductions, the company's stock fell in the early months of 2013 following the divestiture, which did not yield as strong of benefits as predicted. Now, the company holds a much lighter balance sheet, a more nimble business, an outstanding bid for $12 per share by Murdock, and a seemingly confused investor base. What should you do with Dole?

Weak earnings
Dole recently reported its second-quarter earnings, which were relatively disappointing. Net margins managed to grow a bit, while the higher-placed margins shrank. Revenue beat expectations, but net income missed. By most accounts, the earnings were relatively uninteresting, if on the negative side. But the market didn't react substantially, and the stock actually trades a dollar above Murdock's $12 offer.

So what do investors expect of Dole?

An interesting future
Dole going private, for the second time, takes little explanation. Murdock, the billionaire who runs the company and currently owns nearly half of it, wants the whole thing. He announced his offer after the stock had fallen sharply due to the reversal of a previously announced $175 million stock buyback, which had served as evidence that the Dole Asia sale would unlock shareholder value. But management actually put the money to better use than a payout -- it bought three new ships that will hold nearly 800 containers -- up from 491 with its current West Coast fleet. The ships will be more efficient and, in management's eyes, differentiate the company from its competitors.

The question is, will any of that benefit shareholders today, who may get bought out at $12 per sh