Dole Food Company, Inc. (NYSE:DOLE) chairman and CEO David H. Murdock made an unsolicited bid on Tuesday to acquire the fruits and vegetables company. David Murdock and his family’s offer values the company at about $1.07 billion. Dole Food Company, Inc. (NYSE:DOLE) shares surged after the offer.
David Murdock said he has offered $12 per share, an 18 percent premium to its closing price on Monday. Dole Food Company, Inc. (NYSE:DOLE) shares rose 20.69 percent in early market trading to $12.32, indicating that investors expect a counter offer. Murdock already owns about 40 percent stake in the company. His offer values the remaining 60 percent of the company at $645 million.
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Dole Food Board to Form a Special Committee
In a statement, Dole Food Company, Inc. (NYSE:DOLE) said its board will meet over the next few days to create a special committee to review Mr. Murdock’s unsolicited bid. The Westlake Village, California-based company said that it’s just the beginning and the board hasn’t taken any decision yet, reports Mark Scott of the New York Times. If successful, David Murdock will also take over Dole Food Company, Inc. (NYSE:DOLE)’s debt obligations.
Murdock took the company private in 2003, but made it public in 2009 by launching an IPO that valued the fruits and vegetables company at about $1.1 billion. In 2012, Dole Food Company, Inc. (NYSE:DOLE) posted a revenue of $4.2 billion. In the fourth quarter ending March 31, the company posted a net loss and revenues fell short of Wall Street expectations.
Suspension of Share Buyback Program
On May 9, Dole Food Company, Inc. (NYSE:DOLE) announced it would indefinitely suspend its $200 million stock buyback program. Instead, the company said it will use cash to modernize its shipping fleet to boost growth prospects. The company has also suffered heavy losses from its strawberry business.
Goldman Sachs analyst Jason English said that the company’s decision to change capital allocation strategy and use incremental amounts of cash is a negative move that creates investor concern, and that approving a $200 million share buyback might not have delivered a significant shareholder value. The suspension, coupled with a projected negative FCF for this year, demonstrates the company management’s disability to deliver shareholder value.
The company has undergone some major restructuring recently. In April, it sold the Asia fresh and packaged foods business for $1.69 billion. That will help Dole Food Company, Inc. (NYSE:DOLE) narrow its focus going forward. But earnings in the fruit and vegetable business always remain volatile.