Buying an indiscriminate sale (DOLE)

This is a rather fast moving situation and can already be capitalized on pre-market. This is a quick note and I’m just getting to it right after work… after covering and examining placements and extended placements within the APAC region.

But here goes, the US one…

Deal Details

Dole is looking to raise US$164m in a secondary offering, a clean-up sale by the Murdock Group, legacy of the late billionaire David Murdock, who had just passed in June early this year.

Dole has been instrumental in David’s journey, first acquiring the entity through the restructuring of the bankrupt Hawaiian firm Castle & Cooke. David IPOed Dole in 2009, before taking it private again in 2013 for an all-in EV of 1.5-1.6bn, at a takeout price of just over 10x EBITDA. (bear in mind)

Notably, last year, David had began to liquidate his most prized assets, selling the the final acre parcel of land in tiny Hawaii Island, Lanai, to Larry Ellison, of whom he sold majority of, back in 2012.

Quite clearly, this sell-down by the Murdock Group is more of an indiscriminate investment cash-out rather than a sell-down for fundamental reasons.

The deal would be a large one to digest, representing 18.7 days of ADV and 11.3% of shares outstanding.

Book-building will take place through the course of the day and I expect the offering to be sopped up by long only books, so there will be clean support here and the price should revert back above 14 rather shortly.

Recent performance

There are a fair few Substack pieces around on the Dole stock and so I’ll link them to this note: here, here and here.

Just trying to piece where the value is from the recent presentation, Dole highlights an asset value in excess of the current EV..

Dole hasn’t grown particularly much with revenue and EBITDA rather flattish over the last four to five years.

Notably, free cash flow conversion has come down over the last 2 year as the first increased its capital additions, especially in FY24.

Still, Dole is expecting around 385m of EBITDA, 67m of interest expense and ~100m of MCX, which equates to something like ~170m of FCF . Currently at a ~1.2bn market cap and with ~800m of net debt, Dole sports a ~2bn EV, so we’re talking 5.4x EBITDA and 7.5x P/FCF - a steep discount to peers, and where David had privatized at previously, a decade ago.

Peers within the food product space, such as closest peer Fresh Del Monte (FDP), trade at 7.8x EBITDA, with other food peers such as Tyson Foods going for 8x EBITDA, Mondelez going for 14x etc.

If Dole trades somewhere in the postcode of FDP, say at a slight discount of ~7x EBITDA, Dole would still be a $20 stock trading at ~11x FCF, not demanding at all.

Moreover, now with the Murdock Estate out of the way, the Murdock overhang is now lifted and maybe Dole can be put up for strategic review i.e. sold and delisted, as the public markets seem to be unwilling to accord any fair cost of equity for what seems like pretty decent business without much terminal risks and what not.

The stock has been pretty much range bound between 10 to 15 over the last five years, excluding that drawdown in late 2022. It has chopped back and forth through 2025 and briefly crossed 15 sometime in May.

There is not much street coverage here but the average price target is ~34.5% above the offering price, with recent PTs over the last month at $18 and $21.50, respectively.

Disclosure: Quick long on Dole