Shareholders to decide the fate of Dole Food's buyout

David H. Murdock, the chief executive of the Dole Food Company, has offered to acquire the fruit company for $13.50 a share in a buyout that has been approved by the board. The 90-year-old executive has done this before, and it’s a maneuver he knows well. However, a lawsuit brought by some shareholders in the Delaware Chancery Court is challenging the deal, contending that it is rife with conflicts as Mr. Murdock uses his previous experience at taking Dole private to his advantage.

The shareholder lawsuit contends that Mr. Murdock has used his connections to stack the deck in his favor, pushing the special committee of independent directors to approve a deal. While these connections and relationships might appear to present potential problems, the directors considered them and decided, according to a regulatory filing, that they “would act in an independent and disinterested manner.” So there you have it.

The plaintiffs contend that Mr. Murdock timed the buyout to come in a lull in Dole’s stock price, one caused by asset dispositions as the business rebuilds. With a $1.7 billion sale of its Asian fresh produce business and global packaged food business to the Itochu Corporation of Japan in 2012, Dole is now debt-free. Back in the 2003 buyout, it was the 2001 sale of a Honduran beverage business for $537 million in cash and the sale of Spanish and French subsidiaries.

In his buyout offer to the Dole board, Mr. Murdock stated: “Operating Dole Food Company as a private enterprise is the best alternative given the public-market focus on short-term earnings and predictable quarterly results. This will give the company greater flexibility to make investment and operating decisions based on long-term strategic goals.”

And so we are left with shareholders deciding. The deal requires that a majority of all shareholders other than Mr. Murdock approve it in a vote. Shareholders are typically reluctant to take risk, so approval is likely. So the third time is likely to be a charm for Mr. Murdock. One wonders if there will be a fourth, after a seemingly inevitable I.P.O. a few years from now. If that happens, Mr. Murdock can save on legal and bankers’ fees, since the documents are already prepared.

Source: nytimes.com