Castle & Cooke plans
stock buyback

By Russ Lynch
Star-Bulletin

Castle & Cooke Inc. today announced a plan to buy back up to 15 percent of its outstanding common stock, or up to 3 million shares.

The price will be between $17.75 a share and $19.50 a share, depending on how shareholders react to the offer.

The market's reaction was to push the stock up nearly 12 percent today to close at $18.87-1/2 on the New York Stock Exchange, up $1.87-1/2.

"We believe that our company's stock is undervalued at the present time," said David H. Murdock, chairman and chief executive officer.

Honolulu securities analyst Randy Havre of Honolulu Venture Capital agreed. "The book value of the company is $29.19 (a share) so it really is undervalued," Havre said. Because of that, he added, the buyback is a good investment for Castle & Cooke. "It obviously shows that the company has faith in itself." When a company buys back stock it also creates value for shareholders by reducing the number of shares in circulation and increasing demand, he said.

The Los Angeles-based developer of residential and commercial real estate in Hawaii, California, Arizona and Florida, said the buyback price will be set by a "Dutch auction."

In a Dutch auction, shareholders can tender their shares back to the company within a price range that the company specifies. But if a shareholder elects to tender his shares at the high end of the range, there is no guarantee the company will buy them.

In this case, Castle & Cooke will send out materials to shareholders next week, asking them what price they would accept within the $17.75 to $19.50 range. Based on the responses, it will set a price and buy at that price from those who said they would sell for that much or less.

The buy-back cost, which could be between $53.3 million and $58.5 million if enough shares are offered, will come from cash on hand and borrowings, the company said.