Developer Again Ups Bid for Castle & Cooke

Los Angeles real estate developer David Murdock, responding to criticism that he’s paying too little for Hawaiian landowner Castle & Cooke Inc., on Thursday raised his offer for the second time in barely a month.

Murdock, through his Flexi-Van Leasing Inc. of Kenilworth, N.J., said he will pay $19.25 a share for Castle & Cooke in a tentative agreement that would settle eight shareholder lawsuits seeking to block the deal at a lower price.

Although based in Los Angeles, Castle & Cooke owns 98% of the Hawaiian island of Lanai as well as residential and commercial real estate developments on Oahu and in the southwestern United States. Murdock also serves as chairman of Castle & Cooke.

His latest offer stands 4% above an $18.50-per-share bid announced May 22 and is 13% above his original $17 a share bid made March 29. He valued the deal, including the assumption of $273 million of debt, at $615 million.

But the deal would cost Murdock considerably less, because he already owns 27% of Castle & Cooke. Shares of the company closed up 38 cents at $19.06 on the New York Stock Exchange on Thursday.

In raising the price, Murdock was responding to complaints that his initial offer undervalued Castle & Cooke. Some analysts and shareholders believe the value of the company’s varied real estate holdings could top $30 a share.

They pointed out that in a Securities and Exchange Commission filing by Castle & Cooke, investment banker Bear Stearns & Co. valued the company from $17.54 to $30.75 a share, depending on differing assumptions about how profitably Castle & Cooke’s holdings could be developed.

Castle & Cooke was spun off from Dole Food Co. in 1995. Its Hawaiian holdings are largely former pineapple fields that are no longer in operation. “I think a fairer number would have started with a two,” said Craig Silvers, an analyst with Sutro & Co. in Los Angeles.

Murdock, in a statement announcing the new offer and the tentative settlement agreement, said his latest price represents a premium of about 60%, or $123 million, over the $12.06 the company’s shares traded at before he presented his first offer to the board in March.

“I believe that resolving the issues in this manner is in the best interests of everyone involved.” Murdock said. “The shareholders are now able to achieve liquidity for their shares at the higher price provided by the settlement, and we can now focus on completing the offer.”

Dean Estrada, a spokesman for Castle & Cooke, said the parties have a verbal agreement to drop the lawsuits in return for the higher price. The agreement still needs to be put on paper and to gain court approval, but all eight litigants have reportedly indicated that they would approve the deal.

Five of the lawsuits were filed in Los Angeles, mostly by investment groups such as Furtherfield Partners and Great Neck Capital Partners. Three additional suits were filed in Hawaii.

One major shareholder, who asked for anonymity, said that the price “is moving in the right direction,” and that he believes Murdock’s acquisition will move forward.

“It looks like nobody wants to get into a fight with the guy over the company,” he said.

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Buying an Island

Los Angeles real estate developer David Murdock has raised his price twice in his bid to

acquire Castle & Cooke Inc.

This resulted in two big bumps for the stock, in March and May.

Weekly closes and latest:Thursday:

$19.06, up 38 cents

Source: Bloomberg News