Dole Raises $446 Million in IPO, Less Than Planned

By Cotten Timberlake and Michael Tsang

Oct. 22 (Bloomberg) -- Dole Food Co., the world’s largest producer of fresh fruit and vegetables, priced a 35.7 million share initial public offering at $12.50 each, below the low end of its forecast range.

Dole raised $446 million to pay down debt, according to data in a sale document from the Westlake Village, California- based company. The IPO values Dole at $1.09 billion and its shares will begin trading tomorrow on the New York Stock Exchange after a six-year hiatus. Chairman David Murdock took Dole private in 2003 after rescuing the food producer, founded in Hawaii in 1851, from bankruptcy more than two decades ago.

The company which sells fresh bananas and pineapples, packaged spinach and canned fruit had planned to sell shares at $13 to $15 a share, an Oct. 9 filing showed.

“Historically, deals that have been priced below the low end of the initial pricing range have a significantly poorer level of performance in the after-market,” David Menlow, president of IPOfinancial.com in Millburn, New Jersey, said in a telephone interview after the sale was announced. “It is considered in many circles damaged goods.”

The offering is the 16th U.S. company IPO since the start of September, the most over a two-month period since 16 went public in January and February of 2008, data compiled by Bloomberg show.

Lehman’s Collapse

Initial share sales evaporated after New York-based Lehman Brothers Holdings Inc. filed the world’s largest bankruptcy last September, dragging the financial system to the brink of collapse.

The underwriters, including New York-based Merrill Lynch & Co. and Goldman Sachs Group Inc. and Frankfurt-based Deutsche Bank AG, have the option to offer 5.36 million additional shares. Dole initially said it planned to raise about $500 million when it announced the stock sale in August.

Dole intended to use the proceeds to repay $451 million in debt and a prepayment penalty of $17 million, the Oct. 9 filing said. The shares will trade under the ticker DOLE.

The fruit producer also priced $300 million of convertible securities, according to terms obtained by Bloomberg News. The securities were priced at $12.50 a piece and carry a 7 percent coupon. The conversion price was set at $15. They were sold in a private placement to institutional investors.

Vegetables, Bananas

The company has a market value of $1.09 billion, smaller than rival Fresh Del Monte Produce Inc., which is worth about $1.5 billion, and 60 percent bigger than Chiquita Brands International Inc., which has a capitalization of $680 million.

Dole earned $20.9 million in income from continuing operations in the quarter ended in June, according to Dole’s prospectus. That implies a valuation of about 13 times earnings over a full year, based on the company’s market value.

The valuation is higher than the 9.75 times estimated 2009 earnings for Fresh Del Monte, the George Town, Grand Cayman- based fruit and vegetable packer, and 7.12 times for Chiquita, the Cincinnati-based seller of bananas, Bloomberg data show.

To contact the reporters on this story: Cotten Timberlake in Washington at ctimberlake@bloomberg.net; Michael Tsang in New York at mtsang1@bloomberg.net.