Shares of fresh-fruit producer Dole Foods (UNKNOWN:UNKNOWN) soared more than 20% in morning trading after the board of directors announced its chairman and CEO had offered to acquire all of the outstanding shares of company stock he and his family don't already own for $12.00 per share in cash, which values the company at $1.07 billion.
The board said it will be meeting over the next several days to establish a committee of independent directors to consider the proposal by David H. Murdock, who owns 40% of the company, and whether it's in the best interests of the company and its stockholders. Dole cautions the proposal was unsolicited and it's only in its beginning phase, so no decision has been made.
Dole had revenues of $4.2 billion in 2012. The offer values the equity of the company at $1.07 billion and assigns an enterprise value to it of $1.5 billion.
The $12.00-per-share bid represents an 18% premium to yesterday's closing price and the fact that it's trading above that value now suggests investors are contemplating a higher, competing bid will be made. As of this writing, Dole shares are trading at $12.39.
In a letter on file with the SEC, Murdock said his proposal "presents an excellent opportunity for Dole's shareholders to realize an attractive, all-cash premium for their shares at a favorable valuation in a challenging operating environment." He wrote that as a private company, Dole would be better able to undertake necessary efforts that might not pay off in the short term. "This will give the Company greater flexibility to make investment and operating decisions based on long-term strategic goals without the concern that a public company must have for the investing public's short-term expectations," wrote Murdock. "It can also provide opportunities for cost and tax savings."
He wrote that he plans to withdraw the offer if a definitive merger agreement has not been executed by July 31.
Last month Dole said it would indefinitely suspend its $200 million share repurchase program and use its cash instead to update its shipping fleet to enhance its growth prospects. The company said that another factor in the suspension of the repurchase plan was the drag on earnings due to recent losses in its strawberry business.
Dole has gone through a lot of major changes recently. It sold its packaged foods and Asia fresh business for $1.69 billion in a deal that closed in April.
-- Material from The Associated Press was used in this report.
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