Dole IPO Doesn't Look Very Sweet to Investors

| About: Dole Food (DOLE)

Dole Foods' (NYSE:DOLE) IPO was off to a sluggish start after it started trading Friday. After pricing at $12.50 on Thursday, it sank to $12.19 on Friday. According to the Wall Street Journal,

Dole's poor performance could be attributed to multiple factors: its recent decline in revenue and profits, multiple business risks or the fact that its majority owner sold a $300 million convertible-debt deal just as the initial public offering priced.

Business Overview (from prospectus)

We are the world’s leading producer, marketer and distributor of fresh fruit and fresh vegetables, including an expanding line of value-added products. In the primary markets we serve, we hold the number 1 or number 2 market share position in our key product categories, including bananas, packaged salads and packaged fruit. For the last twelve months ended June 20, 2009, we had revenues of approximately $7.2 billion, Adjusted EBITDA of approximately $436 million and net income attributable to Dole Food Company, Inc. of approximately $92 million. See “— Summary Unaudited Pro Forma and Historical Consolidated Financial Data.”

We provide wholesale, retail and institutional customers around the world with high quality food products that bear the DOLE® trademarks. We believe the DOLE trademarks and our products have global appeal as they offer value and convenience, while also benefiting from the growing focus on health and wellness among consumers worldwide.

Offering: 35.7 million shares at $12.50 per share on October 22, 2009. Net proceeds estimated in the last prospectus before the offering was $468 million based on a share offering of $14.00 per share. According to the prospectus, the proceeds will be used for to repay various debts.

Lead Underwriters: Goldman Sachs (NYSE:GS), BofA Merrill Lynch (NYSE:BAC), Deutsche Bank (NYSE:DB)

Financial Highlights:

For the quarter ended June 20, 2009, revenues decreased 14% to $1.7 billion from $2 billion for the quarter ended June 14, 2008... For the quarter ended June 20, 2009, operating income was $108.3 million compared to $121.7 million for the quarter ended June 14, 2008.


The global fresh and packaged produce markets are intensely competitive, and generally have a small number of global producers, filled out with independent growers, packers and middlemen. Our large, international competitors are Chiquita Brands International, Inc. (NYSEMKT:CQP), Fresh Del Monte Produce, Inc. (NYSE:FDP) and Del Monte Foods (DLM). In some product lines, we compete with smaller national producers. In fresh vegetables, a limited number of grower shippers in the United States and Mexico supply a significant portion of the United States market, with numerous smaller independent distributors also competing. We also face competition from grower cooperatives and foreign government sponsored producers. Competition in the various markets in which we operate is affected by reliability of supply, product quality, brand recognition and perception, price and the ability to satisfy changing customer preferences through innovative product offerings.

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