Castle & Cooke Will Not Sell Dole After All

In a surprise announcement, officials at Castle & Cooke Inc. said Thursday that they will not sell Dole Food Co. after all, capping a contentious 19 months of on-again, off-again negotiations to sell or spin off the produce giant.

Reasons ranged from the deteriorating market for acquisitions and financing to Dole’s increasingly strong performance.

“Although several major international food companies expressed interest in acquiring Dole, in the current economic climate the Board of Directors did not believe the interested buyers were prepared to pay a price that fully reflected the company’s potential,” Castle & Cooke Chairman David H. Murdock said in a written statement.

One major West Coast fund manager argued that Murdock will sell Dole eventually. “This is not the end of the story,” this money manager said, declining to allow his name to be used. “The interest that Murdock saw in Dole (from potential buyers) indicates that something’s got to happen down the road,” the money manager said.

Dole spokeswoman Carol J. Klein declined to identify possible bidders or comment on the potential for a future sale. Analysts said Chiquita Brands International of Cincinnati had offered about $2.16 billion for Dole. Other interested companies named were Procter & Gamble of Cincinnati and Sumitomo of Japan.

The Chiquita bid was “a low-ball price” because the company is valued at $2.5 billion to $3 billion, said Randy Havre, president of J. B. Havre Securities, a Honolulu brokerage.

Los Angeles-based Castle & Cooke is the parent company of Dole Food and Oceanic Properties Inc. of Honolulu. Its stock closed at $33.625 on the New York Stock Exchange Thursday, down $0.375 from Wednesday’s trading. The announcement was made after the market closed.

“You will see a selloff on the (Castle & Cooke) stock,” Havre predicted Thursday, “because of the people in there for speculative reasons.”

Jeffrey Greenblatt, partner at investment firm Baker, Nye Investments in New York, estimated that Castle & Cooke is worth $46 to $48 a share if the food and real estate units are fairly valued. Because the stock has been trading around $33.625--rather than closer to the company’s potential value--Wall Street’s disappointment isn’t likely to be so great, he said.

He believes that the stock will fall back to the high $20 range, which would become “an attractive level” for investors who wanted to buy for Castle’s long-term earnings potential. The stock traded as low as $26.25 in October, when it last appeared that Castle was having trouble peddling Dole.

Several money managers who own the stock applauded Murdock’s decision to take Dole off the market rather than sell at a cheap price, even if the stock price falls temporarily. “It’s a business you should only sell when you can get the price it deserves,” said one money manager, requesting anonymity.

One probable obstacle to getting that good price is the potential sale of competitor Del Monte by troubled British conglomerate Polly Peck. Potential buyers of Dole may figure that they can get a much better deal for Del Monte.

Castle & Cooke announced in May, 1989, that it would spin off Dole to create separate corporate identities for its food and real estate subsidiaries in an effort to better finance both segments’ growth.

But tight credit and slow government approval put a roadblock in Castle & Cooke’s progress, and in May, 1990, the company announced that the spinoff was in trouble. Two months later, Castle & Cooke said that it had been contacted by “several major companies” interested in buying Dole.

And Thursday, the company shifted gears again and took the “For Sale” down. The proposed spin off is also on indefinite hold, Klein said. Castle & Cooke also said Thursday that that it will pay a regular quarterly dividend of 10 cents a share--its first dividend since April, 1982.

Dole’s revenue was $2.55 billion in 1989, up from $2.3 billion in 1988. Dole is the dominant worldwide producer and distributor of fresh produce, the world’s largest pineapple producer and No. 2 in bananas and citrus.