Monday, December 16, 2002

Murdock faces stiff challenge
in bid to take Dole private

By Gary Gentile
Associated Press

LOS ANGELES >> Self-made billionaire David Murdock has made and lost fortunes.

A high school dropout, he bought and sold a small restaurant in the 1940s then used the proceeds to start what would become a real estate empire in Phoenix.

That began a lifetime of wheeling and dealing that has led to ownership of more than 10 companies and a 1,600-acre ranch stocked with Arabian horses.

Now the chairman and chief executive of Dole Foods Inc., the world's largest producer of fresh fruits and vegetables, is trying to make what could be one of his most lucrative deals ever.

Murdock has offered $29.50 a share -- about $1.3 billion -- for the 76 percent of Dole that he doesn't already control. The offer has been rejected by Dole's board as too low, but negotiations are continuing.

If successful, the deal would give Murdock sole control of Dole, freeing him from having to satisfy profit-hungry shareholders and curry favor with Wall Street analysts.

"I don't think he likes outside involvement," said Heather Jones, an analyst with BB&T Capital Markets. "He's the epitome of the self-made man. He has always done things the way he wants to do them. He's 79 years old and he doesn't want to change things now."

Murdock stands to make millions of dollars if the company shows major growth and the stock market rebounds, allowing him to sell shares back to the public at a higher price.

Sole control would also give him the ability to transfer cash from Dole to his other business ventures, something that's prohibited as long as Dole remains public.

Murdock did not respond to requests for an interview about the deal. He has set a Dec. 18 deadline for Dole to accept his offer, which was first made in September and extended twice.

Since Murdock first made the bid, no competing offers have surfaced. Dole's two main competitors, Chiquita Brands and Fresh Del Monte Produce Inc., would likely face stiff regulatory opposition in the United States and Europe if it tried to combine with Dole.

Meanwhile, Dole's languishing stock has been trading below Murdock's offer. Still, analysts believe Murdock will have to raise his bid to about $34 per share to satisfy stockholders.

"Given the recent increased scrutiny of boards and CEOs, we believe Murdock may have to increase his bid, as his offer clearly benefits one large shareholder to the detriment of remaining investors," Jones wrote in a September report.

Alexander Roepers, a vocal critic of the deal whose Atlantic Investment Management Inc. owns 6 percent of Dole shares, claims the stock has been hurt by the "Murdock discount" an impression that he has run Dole as a quasi-private company without due regard for investors.

Dole, for instance, does not actively court financial analysts, preferring to keep a low profile on Wall Street. A more aggressive effort to tout the company could result in more demand for the stock and more profits for investors, Roepers said.

A key question for investors is whether Dole's shares will climb on their own in the coming months, making it wiser to wait rather than accept Murdock's offer.

In recent years, Dole has bounced back from a number of problems, including a worldwide banana glut, Hurricane Mitch and severe freezes that hurt crops in California. The company has become a leader in the packaged salad business that has surged as the country becomes more health-conscious.

Such moves have helped bolster the bottom line. In the most recent quarter, Dole reported net income of $14.7 million, compared to a net loss of $94.8 million in the same quarter last year. For the first nine months of 2002, Dole reported net income of $137.8 million, compared to a net loss of $23.1 million for the first nine months of 2001.

Ultimately, Murdock's buyout may be more about control than profits. He has a history of maintaining control of his firms and using cash from one successful venture to fund others.

He is credited with rescuing Dole in 1985, when the company was deeply in debt and reeling from two hostile takeover attempts. He merged his container leasing company, Flexi-Van, with Castle & Cooke, as Dole was then known, and trimmed the company's operations.

At the time, the firm included fruits and vegetables marketed under the Dole brand. In 1991, the corporation changed its name to Dole Foods.

In a move to diversify four years later, Dole ceased pineapple production on Lanai to concentrate on developing the property for tourism. The company spun off Castle & Cooke as its development arm, with Murdock owning 27 percent of the new firm.

Two years ago, he made a tender offer worth $700 million for the rest of the stock and took Castle & Cooke private, giving him sole control of what has been a real estate gold mine.

Such management buyouts are not unusual but are often complicated because the people who know the most about the prospects of the company are the ones making the offer.

"On one hand, management is obligated to watch out for the best interest of the shareholder, and on the other hand they want the best possible deal for themselves," said Jeffrey Jordan, a corporate and securities lawyer.

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