Dole shares soar upon news of acquisition

Associated Press

LOS ANGELES — Shares of Dole Foods soared more than 14 percent yesterday on news that the world's largest producer of fresh fruit and vegetables had agreed to be acquired by its chief executive.

But Dole's credit rating was cut to junk bond status by one rating agency to reflect the large amount of additional debt needed to finance the deal.

Dole's board of directors and CEO David H. Murdock agreed late Wednesday to a deal that would value the company at $2.5 billion.

Murdock agreed to pay $33.50 per share to buy the 76 percent of the company he doesn't already control. That price is $4 per share more than what Murdock first offered in September. Murdock will also assume about $660 million of Dole debt.

The deal must still be approved by shareholders and is contingent on Murdock obtaining financing.

Shares rose $4.13 to $32.58 in regular trading yesterday on the New York Stock Exchange on news of the deal.

The deal was a victory for some shareholders who had urged the board to reject Murdock's original offer of $29.50 per share.

Alexander Roepers, whose Atlantic Investment Management Inc. owns 6 percent of Dole shares, said he does not know how he'll vote when shareholders meet early next year.

"I think fair value is well north of here," said Roepers, who has previously valued Dole as high as $39 per share. "There are discussions to be had in the meantime and perhaps more can be done, even with Murdock. It is still a very good deal for him."

Murdock had argued that all attempts to boost Dole's share price over the past two years had failed, leaving his offer as the company's best alternative.

"I believe the company can be better managed as a private company," Murdock told the Ventura County Star in a telephone interview shortly before the deal was announced.

"I'm buying it, so I don't think it's a bad deal, but it's not a steal at this price," he added. "It's a very steep price in today's market "

The transaction was unanimously approved by Dole's board of directors, with Murdock abstaining.

To finance the deal, Murdock will have to issue up to $450 million in new debt.

That prompted Standard & Poor's to downgrade Dole's existing rating to BB, its second-highest junk bond grade. The rating agency said it would keep Dole's debt on credit watch with negative implications until it sees details of the financing.