Dole shares fall following IPO that priced low

Shares of Dole Food Co. edged below their starting point Friday after the fruit and vegetable producer's initial public offering priced below what it had previously expected.

The stock, which trades on the New York Stock Exchange under the ticker "DOLE," declined 17 cents to $12.33.

The company, which is controlled by businessman and investor David H. Murdock, was most recently publicly traded in 2003.

After the new public offering, Murdock, who is also Dole's chairman, will own 59 percent of the company. Murdock took the company private in March 2003 in a transaction valued at $2.5 billion.

The company priced its IPO of 35.7 million shares at $12.50, raising $446.4 million, but had originally expected its stock offering to price between $13 and $15 per share.

Dole, which is based in Westlake Village, Calif., said it will use some of the proceeds to pay down $85 million of a $115 million debt personally guaranteed by Murdock, leaving $30 million on that debt. As of Oct. 10, the company estimated that it had $1.9 billion in total debt, according to an IPO filing on Thursday.

Dole said Murdock and his affiliates will "be in a more favorable financial position" when the transactions are completed. But the company said it has no immediate plans to pay dividends.

Dole also plans to transfer ownership interest in 1,600 acres of idle farmland in Honduras to Murdock, worth about $12 million.

Dole reduced total outstanding debt by $145 million during the second quarter and has been selling off its assets. During the first quarter, Dole received $85 million in cash from closing on three different sales, including a number of vegetable properties in California.

The company also is selling properties in Latin America and expects to receive $100 million once all the sales are completed.

Morningstar analyst Erin Swanson, in a recent research report, said Dole has been forced to raise prices to cover mounting costs, but consumers are still hesitant to pay full price.

"We believe Dole lacks pricing power in this intensely competitive market, as consumers perceive the produce category as commodified," he wrote in a research report. "They are more likely to consider price than brand when making a purchase decision."

Swanson also said its corporate governance is not shareholder-friendly, given Murdock's control of the company, making her "doubt that minority shareholders will have much of a voice."

For the second quarter ended June 20, Dole earned $20.1 million, down from $180.8 million. Revenue also declined to $1.71 billion from $1.99 billion a year earlier because of weakness in sales of fresh fruit, vegetables and packaged foods.