Dole Food Co., Inc. (DOLE) said Monday that it has agreed to sell its worldwide packaged foods and Asia fresh produce businesses to Japanese trading company Itochu Corp. (ITOCY) for $1.69 billion in cash.
In connection with the deal, Dole will recapitalize its debt structure. The company will also streamline its global personnel and corporate structure to conform to the specific needs of the remaining fresh produce businesses. Shares of Dole gained more than 3 percent following the announcement.
The deal with Itochu resulted from Dole's previously announced strategic business review process and is subject to its stockholder approval as well as regulatory approvals in several countries.
Dole will use cash proceeds from the deal to reduce debt, pay deal-related expenses, restructuring and for other corporate purposes.
Dole Worldwide Packaged Foods produces canned pineapple, canned pineapple juice, fruit juice concentrate, fruit in plastic cups, jars and pouches, fruit parfaits, healthy snack foods and frozen fruit. Dole Asia Fresh Produce grows, sources, ships and distributes fresh fruit and vegetables principally in Asia.
The combined revenue of these businesses totaled about $2.5 billion in 2011, while adjusted earnings before interest, taxes, depreciation and amortization or EBITDA for these businesses was about $190 million, excluding the allocation of corporate overhead.
Under the deal, Itochu will gain exclusive rights to the Dole trademark on packaged food products worldwide and on fresh produce in Asia, Australia and New Zealand.
Meanwhile, Dole will retain its entire North American fresh vegetables business as well as its fresh fruit businesses in North America, Latin America, Europe and Africa, which together generated revenues of about $4.2 billion in fiscal 2011.
David DeLorenzo, President and CEO of Dole Foods said, "We are realizing a premium valuation for our worldwide packaged foods and Asia fresh produce businesses and will retain a strong fresh produce business that has increased financial flexibility to grow."
Following completion of the deal, Dole's fresh produce business will continue to source, distribute and market bananas, pineapples and other tropical fruits, packaged salads, fresh-packed vegetables and fresh berries, which represent the number one or two market share in many of the fresh fruit and vegetable products that Dole sells in North America.
Dole will continue to own the significant operating assets associated with these businesses in addition to non-core assets, including about 25,000 acres located in Oahu, Hawaii.
The company expects new debt to be issued on more favorable terms after recapitalizing its debt structure in connection with the deal.
As part of the streamlining of its personnel and corporate structure, Dole will evaluate the clearing of any legacy costs and liabilities remaining with the company. Dole expects to fully implement these measures by the end of fiscal 2013, resulting in annual cost savings of about $50 million.
DOLE closed Monday's regular trading session at $13.70, down $0.10 or 0.72 percent on a volume of 708,889 shares. However, in after-hours, the stock gained $0.50 or 3.65 percent to $14.20.
ITOCY closed Monday's trading at $21.29, up $0.44 or 2.11 percent on a volume of 21,687 shares.
by RTT Staff Writer
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