Developer Falls Short in Bid for Castle & Cooke

Real estate developer David Murdock fell short of his goal of collecting 75% of Castle & Cooke shares that he doesn’t already own and now faces the prospect of either dropping his bid or paying millions of dollars more for the company through a court-supervised appraisal process.

Holders of about 7.2 million shares agreed to Murdock’s $19.25 offer for the Los Angeles-based company, which owns the Hawaiian island of Lanai and real estate in the South and Southwest United States, Castle & Cooke said Friday.

That amounts to about 58% of the shares Murdock doesn’t own, and leaves more than 5 million shares still outside his control. Murdock has said he would consider scrapping the bid if he did not collect 75% of the shares that he does not already own.

Murdock, who also serves as chairman of Castle & Cooke, has sought to acquire the company through his Flexi-Van Leasing Inc. since March 29, when he offered $17 a share. His offer faced wide criticism by shareholders as being too little, and he has been forced to raise the price twice to keep the deal moving forward. Murdock’s offer is worth about $615 million, including the assumption of $273 million in Castle & Cooke debt.

Bear Stearns & Co., Castle & Cooke’s investment bank, has valued the company in a range that extends from $17.54 to $30.75 a share, depending on different assessments of its development potential.

Counting his own holdings and the tendered shares, Murdock now controls 68% of the company.

Although that’s enough to force an eventual acquisition by Flexi-Van, it’s far below the 90% threshold that would allow Murdock to bypass the lengthy process of issuing proxy statements to all shareholders and organizing a shareholder meeting to vote on his proposal.

Such a meeting could give dissenting shareholders time to organize a defense against the merger or seek another bid for the company. Murdock has defended his price, noting that it is 60% above where the shares traded the day before he made his first offer.

Several holders of large share blocks reached Friday said they plan to keep their holdings and use an unusual Hawaiian securities law to force Murdock to go through a court-supervised appraisal of the company. Under the law, a Hawaiian court could force Murdock to pay a higher price to dissenting shareholders.

“People did not tender their shares for deliberate reasons,” said Alan Kahn, a New York money manager and dissident shareholder.

“I think $5 a share more could be well within the realm of possibility,” said Craig Silvers, an analyst with Sutro & Co. in Los Angeles. That would add $25 million and court expenses to the cost of the deal.

Representatives of several large blocks of shares decided to withhold their support of Murdock, including the wealthy Tisch family of New York, which is Castle & Cooke’s second-largest shareholder with nearly a 10% stake.

The family declined to comment, but an individual familiar with their plans said they didn’t see any benefit in tendering their shares. Such a move would have given up their rights to participate in an appraisal, an option they can now consider.

Moreover, most shareholder groups expect Murdock to extend the offer through the end of next week to collect a bigger stake in the company and reduce the number of shares eligible to participate in an appraisal.

Already, Castle & Cooke has extended the deadline by a day, through the end of Friday, because of communications problems between the agencies collecting the shares.

Castle & Cooke shares closed down 6 cents at $19.19 on the New York Stock Exchange on Friday.

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Who Has Control

Real estate developer David Murdock is in control of about 68% of Castle & Cooke but still must convince holders of more than 5 million shares to accept his $19.25-a-share bid for the company, which owns the Hawaiian island of Lanai and other real estate.

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Owners agreeing to sell shares: 42.1%

Owners dissenting: 31.6%

Murdock owns: 26.3%

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Source: Times research