|Shares Out. (in M):||89||P/E||0.0x||0.0x|
|Market Cap (in M):||956||P/FCF||0.0x||0.0x|
|Net Debt (in M):||260||EBIT||0||210|
DOLE is not just a fruit and vegetable company. DOLE is a real estate and hard asset company with a fruit and vegetable operation attached to it. Investors are dramatically underestimating the incredible breadth and value of DOLE’s non-core assets (it’s not just farmland!), causing DOLE shares to trade at a severely depressed multiple of what management has stated are trough earnings. On Monday, DOLE will close on the sale of its Asian businesses for $1.7 billion, allowing the company to retire virtually all of its debt, creating a dirt cheap stub trading at 3-4x PF EBITDA that is begging to be re-levered for a large special dividend or share buyback and/or taken private. I estimate fair market value for DOLE shares is at least 50-100% higher than the current price, with a large margin of safety and even greater potential upside based on performance, financial engineering and likely underestimated hidden asset value.
Key Non-Core Assets
Notes on Pro Forma Valuation
|Stock Price||$ 10.72||$ 10.72|
|- Cash||(92)||92||-||assume $0 cash for conservatism; all cash should be retained|
|+ Debt||1,694||(1,434)||260||per M&A call gross debt $260mm|
|+ Pension & OPRB||245||245|
|TEV (ex. Pension & OPRB)||$ 2,559||$ 1,216|
|TEV (incl. Pension & OPRB)||$ 2,804||$ 1,462|
|PF TEV (ex. Pension & OPRB)||$ 1,216||$ 1,216||$ 1,216|
|PF TEV (incl. Pension & OPRB)||$ 1,462||$ 1,462||$ 1,462|
|Oahu Land (18,260 acres)||195||205||215||$217.3mm asking price (http://www.cbre.us/o/baltimore/properties/oahu-land/pages/overview.aspx)|
|Other "Non-Core" Hawaii Land (~6,740 acres)||67||71||74||est at $10-11k/acre; p. 4 of M&A pres says 25k non-core Hawaii acres in total|
|Land at 1 Dole Dr., Westlake Village, CA (Corp HQ)||15||23||30||30 acres of property, value at $0.5-1.0mm/acre (http://goo.gl/maps/JntCS)|
|Building at 1 Dole Dr., Westlake Village, CA (Corp HQ)||65||100||150||169k sf, $65mm cost to build in 1999 (http://assessormap.co.la.ca.us/mapping/viewer.asp)|
|Land at 2 Dole Dr. (Four Seasons/Wellness Center/Spa)||10||15||20||20 acres of property, value at $0.5-1.0mm/acre (http://goo.gl/maps/JntCS)|
|Buildings at 2 Dole Dr. (Four Seasons/Wellness Center/Spa)||-||100||200||20 acres, $81mm cost to build ex. land, improvements alone assessed at $159mm|
|Bombardier Global Express||15||20||25||http://registry.faa.gov/aircraftinquiry/NNum_Results.aspx?NNumbertxt=N85D|
|Other "Non-Core" Assets||200||200||200||this is a guess, includes 88k owned acres ex. Hawaii, housing compounds, research facilities, schools and hospitals|
|Total||567||733||914||"Over $500mm FMV of non-core assets (e.g. idle land)" - p. 10 of M&A presentation|
|Excess Working Capital||-||50||100||Up to $200mm per M&A call Q&A|
|PF Adjusted TEV (ex. Pension)||649||433||202|
|PF Adjusted TEV (incl. Pension)||894||678||447|
|2013 EBITDA||150||160||170||Mgt guidance, calls this "trough" earnings in M&A call|
|+ Cost Savings||50||50||50||Hard cost savings (largely corporate o/h) per mgt guidance, to be fully run-rated late 2013|
|2013 PF EBITDA||$ 200||$ 210||$ 220|
|Normalized Capex||70||70||70||Per Q4 conf call 60-70 range; $100mm 2013 strategic capex funded from TL & CFO per Q4 conf call|
|2013 PF EBITDA - Norm. Capex||$ 130||$ 140||$ 150|
|PF Adjusted TEV (incl. Pension) / 2013 PF EBITDA||4.5x||3.2x||2.0x|
|PF Adjusted TEV (incl. Pension) / (2013 PF EBITDA - Norm. Capex)||6.9x||4.8x||3.0x|
|2013 PF EBITDA - Norm. Capex||$ 140||$ 140||$ 140|
|Multiple||10.0x||11.0x||12.0x||8-10% unlevered FCF yield|
|TEV||$ 1,400||$ 1,540||$ 1,680|
|- Pension & OPRB||(245)||(245)||(245)|
|+ Cash||-||-||-||Very conservative, likely $90mm+ of cash|
|+ Non-Core Assets||500||600||700||Let's be conservative|
|Value/Share||$ 15.63||$ 18.33||$ 21.02|
|Entry||03/28/2013 01:11 PM|
Disclaimer: The author of this idea presently has a long position in securities of this issuer and may trade in and out of these positions without notice. The data contained herein are prepared by the author from publicly available sources and the author's independent research and estimates. No representation or warranty is made as to the accuracy of the data or opinions contained herein.
|Entry||03/28/2013 01:35 PM|
thanks for the idea. two questions:
1) for valuing operations, you use an 8-10% unlevered FCF yield. however, it looks like you haven't taken anything out for taxes... are they not paying income taxes?
2) you mentioned that this is trough earnings... is that just for the banana business or for the entire business?
|Subject||Hidden Assets bullets|
|Entry||03/28/2013 01:38 PM|
Sorry for the poor formatting of the Key Non-Core Assets bullets, but when you're reading make sure you note that sub-bullets are in many cases separate hidden assets.
- Hawaii land for sale
- Other non-core Hawaii land
- 1 Dole Dr.
- 2 Dole Dr.
- Bombardier Global Express jet
- Latin American offices
- Sweden offices
|Entry||04/01/2013 04:07 PM|
thanks for the interesting idea and active Q&A. it seems that this investment is likely to really work if the issues facing the core bus for several years reverse-- to that end, is your thesis that the persistent downtrend in EBITDA of the last few years caused by competitive dynamics and supply issues IS actually likely to reverse or is this just a cheap option on an ok business that isn't likely to get too much worse with a smart capital allocator (nothing wrong with that)?
|Subject||Mgmt makes $12 buyout offer|
|Entry||06/11/2013 07:28 AM|
First, another good idea from cuyler even though it did not play out exactly as expected. The value was there. Always difficult to figure out how mgmt plays it in situations like this.
I imagine that, in retrospect (hindsight is 20/20), the suspension of shr buyback was indication that something was in the wings.
Any thoughts on chance that buyout happens at >$12? Is $12 start of negotiation or the final offer?
|Subject||RE: RE: Mgmt makes $12 buyout offer|
|Entry||06/11/2013 05:38 PM|
alas, I did not make money. I could never get comfortable with Murdock. I agree very much with your analysis throughout, and i do not think you erred at all . . . except in hindsight.
This morning, I was wondering about a higher negotiated deal, but also think significant chance murdock walks away so not a layup even at $12 . . . and not attractive at $12.50. alas, missed the move from $12 to $12.50 as well.
|Entry||06/17/2013 08:54 AM|
Murdock should offer to spin the $5.56 of non-core assets into a contingent value right (CVR), and bump his cash price as well. In this way, shareholders can be assured they are getting the best value for both core and non-core assets. The new deal consideration would be say $13.75 of cash and 1 CVR.
|Subject||RE: DOLE CVR|
|Entry||06/17/2013 09:23 AM|
Given the recent history, is there any reason to believe this will happen, or is this just what would be "fair" in a world where management cared about doing the right thing?
|Subject||RE: DOLE CVR|
|Entry||06/17/2013 11:37 AM|
can you send me the sheet on math of your CVR proposal? thanks
|Subject||RE: RE: DOLE CVR|
|Entry||08/12/2013 10:50 AM|
It would be fair in an ideal world - but we know that the idea of the CVR is in the public domain and so it's likely the special committee has seen it
|Subject||CEO Murdock bumps to $13.50!|
|Entry||08/12/2013 10:51 AM|
Murdock raised his bid to $13.50 all cash and he and the company have signed a definitive merger agreement as of today! That's 12.5% above the initial $12.00 offer and 32.4% above the 6/10/13 pre-deal share price of $10.20. In the absence of another bidder I would see the deal closing in the November timeframe, based on the timing around SEC clearance of a definitive proxy and a majority of the minority shareholder vote.
Lazard will now spend 30 days shopping the company, so potential exists for one or more new bidders.
Link to press release:
|Subject||Go shop expires Sept. 12th; other bidders in proxy|
|Entry||08/21/2013 01:24 PM|
Based on the preliminary proxy filed today it appears that the go-shop period will end on September 12th. As of August 16th, interested parties had executed confidentiality agreements and were granted access to an online datasite to commence diligence. The proxy discusses prospective bidders (particularly Party B and Party C) and the stock is now trading through the $13.50 deal price. Companies are taking a close look at DOLE and that is good for shareholders. Murdock has run his play book from 2003 all over again, but the endgame here may look very different thanks to one stubborn fact....
|Subject||RE: RE: Go shop expires Sept. 12th;|
|Entry||08/26/2013 08:42 PM|
Hi rh121 - thanks for your question!
From the proxy it seems that other bidders have so far not been dissuaded by his large stake.