than its stock. The venerable company announced this week that it has begun a strategic review which may result in one or more spin offs.
Controlled by 88 year old billionaire Chairman David Murdock(he plans to live to 125) who bought the company out of bankruptcy decades ago, Dole is burdened with debt and well below the $12.50 price of its 2009 IPO. As of March 24th, LTM Total Debt/EBITDA is still a whopping 5.3x and Total Debt/Equity is 188%. The debt is a legacy of Mr. Murdock’s privatization of the company via a heavily leveraged LBO nearly 10 years ago. While the IPO was supposed to pare down the debt, it priced lower than expected and quickly sank amidst leverage concerns. This poor performance has led the company down a path which one analyst says may deliver a 58% gain. Though the company provided scant details, speculation abounds that the company will spin off its profitable packaged food business with debt to improve the balance sheet of the fresh fruit and vegetable business.
Another possibility is that the company could sell or spin its extensive Hawaiian land holdings which may be worth $400 million. Interestingly, Dole was formerly a part of Castle & Cooke, one of Hawaii’s “Big Five” companies that controlled the Territory. Alexander & Baldwin(ALEX), another of the “Big Five” has also announced its intentions to split off its Hawaiian land business from its other business. If such a thing is possible, might a double reverse Morris Trust combining the two land companies make sense?
Disclosure: The author holds no position in any stock mentioned, dislikes pineapple, and has still never been to Hawaii
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- Dole shares jump on possible spin-off (seattlepi.com)
