Castle & Cooke Says It Is Discussing Merger
Castle & Cooke Inc., the nation’s largest producer of fresh fruits and vegetables--including Dole-brand pineapples and bananas--said Friday that it is discussing a merger with another New York Stock Exchange company that could pay its shareholders less than the current market price for their shares.
However, the company added, there is “no assurance” that an acceptable “no-premium” merger will be reached. C&C; common stock closed at $13 a share in trading Friday, up 62.5 cents.
Strapped for cash, Castle & Cooke was forced to miss the March 1 interest payment due to holders of its 5 3/8% convertible subordinated debentures and its 12% subordinated notes. If payment is not made within 30 days, the debt will become immediately due and payable.
Global Banana Glut
In its announcement, the company said it is discussing with its senior lenders a waiver enabling payment of the interest due March 1. It is also seeking to reach a long-term restructuring of about $250 million in debt.
The company’s financial plight stems, in part, from a global glut in bananas that has depressed prices so low that, at times, the company lost $1 on each box of fruit it sold--and couldn’t sell all the fruit it had available.
In the first half of fiscal 1985, it reported a loss of $63.9 million, including a second-quarter operating loss of $34.6 million that was attributed to much lower selling prices for bananas and lettuce and higher interest charges, among other factors.
The company also canceled a previously declared preferred dividend totaling $2.3 million.
To raise cash, Castle & Cooke in January agreed to sell its Bumble Bee Seafoods division to a group of investors led by the division’s management, which borrowed a $40-million down payment against the division’s inventory. The undisclosed balance is to be paid from profits over the next five years.
Real Estate Holdings
While short on cash, the company has extensive land holdings in California and Hawaii, including the Island of Lanai, on which it grows pineapples. Indeed, its real-estate subsidiary, Oceanic Properties Inc., contributed $9 million in net income last year.
These real estate riches have made the company attractive to a series of investors in recent years.
Charles Hurwitz of Houston early last year bought a 12% stake in the company and threatened to buy more before selling his stock back to the company for more than $70 million, realizing a profit estimated at $15 million.
More recently, Minneapolis investor Irwin L. Jacobs led an investor group that also acquired a 12% stake and disclosed that it might seek to take control of the company. If that were done, according to some securities analysts, Jacobs could sell the produce operation to a food company while retaining the real estate subsidiary.
While seeking to reduce long-term debt by selling assets, Castle & Cooke also wants to recast itself as more consumer oriented through association with branded products.
