Dole wants to go Private

Dole wants to go PrivateThe fresh fruit business is definitely facing challenges right now. Profit margins are tight, bad weather is a hassle, and growers are often selling directly to retailers and bypassing the suppliers. All in all, it is not the best time to be in the fresh fruit business.

Because of the obstacles, many believe Dole Chief Executive Officer David Murdock’s offer to take the company private is attractive, so Dole accepted the offer on Monday. The purchase price of about $1.6 billion, or $13.50 per share, is about $500 million than the CEO’s original June offer. If this deal does go through, it will be the second time Murdock has taken the company private. The sale to take the company private is expected to happen before the end of the year, assuming there are no higher bidders.

The end result is that banana purchasers can expect higher prices. Produce sellers such as Chiquita Brands International, Fresh Del Monte Produce, and Dole, which is the largest U.S. banana supplier; have been fighting for market share. During the last year alone, prices have dropped three percent across the industry, which is actually enough to negatively impact financial results. According to experts, when one of the larger companies goes private, there is more room for rational pricing. So in other terms, Murdock assumes that the deal to go private will enable the company to boost prices.

Murdock is a 90-year-old CEO who has traveled this road before taking the company from public to private. Ten years ago he paid $2.5 billion for a larger company. Dole divested its worldwide packaged foods and Asian fresh foods business this spring for $1.7 billion cash, most of which it used to pay down debts. Those units that were sold represented about 38 percent of the company’s overall revenue, which $6.8 billion last year.

Reluctantly, in 2009, Murdock was forced back into the public market because of Dole’s heavy debt load. The company has suffered multiple losses in the fresh fruit businesses, including a deep hit to the Southern California strawberry fields that suffered from extreme weather this year. Dole is currently the second largest strawberry supplier in the U.S.

A way for Dole to deal with the challenges is to keep cutting costs and to continue to focus on the margins for its fresh fruit, vegetables and packaged salads businesses with higher prices, according to experts.

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About the author

Kristin covers health, science and internet news.