Dole Food Hires Goldman to Explore Options

Dole Food Co., the nation’s largest fresh-fruit and vegetable producer, said Tuesday that it has hired Goldman Sachs & Co. to explore options, including a possible sale, to help boost its sagging share price.

The Westlake Village-based global food giant has seen its bottom line suffer as a result of a European quota on bananas that caused a price-depressing worldwide glut.

Dole said its banana troubles contributed to its third-quarter loss of $8 million and its decision to exit the banana business in Nicaragua and Venezuela, areas that account for 17% of its worldwide production.

The problems have pushed the company’s stock down 56% from last April’s high of $34.13. Dole’s shares dropped 31 cents to close at $14.94 on Tuesday on the New York Stock Exchange.

Given the bargain-basement stock price and the problems currently plaguing its banana and money-losing cut-flower business, analysts were surprised that the company would even consider a sale.

“Right now, they are selling wilted flowers and green bananas,” said John McMillin, a food industry analyst with Prudential Securities in New York.

“It doesn’t seem like the ideal time to maximize shareholder value,” McMillin said.

Analysts say there are no obvious buyers for the company. There aren’t many packaged-food companies that could leverage Dole’s unique global assets, said Terry Bivens, an analyst with Bear Stearns in New York.

The company could look for a buyout firm to swoop in and reorganize, or it could consolidate with a competitor such as Chiquita Brands International Inc., Bivens said, which last month confirmed it is considering a sale of some or all of its assets.

Dole President David DeLorenzo declined to comment on these options, saying only that the company will consider several options including a sale, merger or just an outside appraisal by Goldman of its current operations to validate it in the eyes of shareholders.

The current incarnation of Dole Food was created in 1995 when the agriculture business was separated from the Castle & Cooke real estate and resorts business.

One large institutional shareholder, who asked to remain anonymous, said that despite the plummeting stock price, there has been no frustration among shareholders with the company’s management, led by Chairman and major stockholder David Murdock. “They have built a global business that will do extremely well when the economies return to growth, in Asia particularly,” the investor said. “I still think it’s a well-managed company”

Indeed, analysts say, the company is well-positioned to weather a downturn for several more years, a fact that makes Tuesday’s announcement that much more surprising.

“They’ve got problems, but they’re not on the deathwatch,” McMillin said. “They can survive the downturn longer than Chiquita.”

The situation could improve dramatically, says a U.S. trade official, if the new European Commission works to resolve its banana dispute with the World Trade Organization, a battle that has resulted in $191.4 million in U.S.-imposed retaliatory duties on many European goods such has handbags, pens and batteries.

But even if the EU fails to relax its import quotas, DeLorenzo believes the company’s banana business will receive a boost from global attrition as smaller producers drop out, a recovery in the Asian and Russian markets, and the streamlined company’s lower cost structure.

“The banana business is still a core part of Dole’s business, and we expect that to improve over time,” DeLorenzo said. “We see this as just a positive move, to look at all our option to enhance shareholder value.”