Why Dole Food Shares Popped
Jun 11th 2013 5:42PM
Updated Jun 11th 2013 6:50PM
Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of Dole Food were looking sweeter today, gaining as much as 22% after CEO David Murdock offered to pay $12 a share for the remaining 60% of the company that he doesn't already own.
So what: The offer from the 90-year-old Murdock sent shares well above the $12 threshold as they closed at $12.46, indicating that some investors expect Murdock will have to raise the bid for the buyout to go through. Murdock's CEO position and 40% ownership of the company make it likely that some kind of deal will be reached. Murdock formerly ran the company CEO from 1985 to 2007, when it was a private enterprise, took it public as chairman in 2009, and returned to the executive chair in February when former CEO David DeLorenzo left to run a division in Asia that was sold off to Itochu.
Now what: The buyout offer certainly makes Dole seem more attractive, but it's hard to see how Murdock would extract greater value from the company. Before today's announcement, Dole shares had dropped more than a third from its September peak following the sale to Itochu, and recent earnings reports have not instilled confidence. Revenue growth is essentially flat, as it's part of the stagnant produce industry, and profits have been slim. Given that, Murdock's offer looks like a good exit opportunity for current shareholders.
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