Group Against Castle & Cooke Buyout Plan
An investment group from Houston says it will vote against a plan by Castle & Cooke Inc. Chairman David Murdock to buy out the company, which owns the Hawaiian island of Lanai, at $18.50 a share.
Furtherfield Partners said Friday it objected to an agreement by the Murdock-controlled Flexi-Van Leasing Inc. of Kenilworth, N.J., to purchase the 73% of Castle that it does not already own.
The deal would value Castle at $600 million.
Castle said Monday that a special committee of its board of directors approved the plan, which boosted by 9% the $17 a share Flexi-Van offered March 29. But the committee, made up of four directors who do not work for Castle, said it would consider other offers up to June 30. Its shares closed unchanged Friday at $18.38 on the New York Stock Exchange.
Los Angeles-based Castle faces eight shareholder lawsuits challenging Flexi-Van’s original proposal.
Although the $18.50 a share offer is a 57% premium over Castle’s 52-week low of $11.75 reached Feb. 2, some shareholders and stock analysts maintain that the company is worth more.
One major shareholder said the company is difficult to value because of the unique assets, which include two hotels and 88,000 acres on Lanai, virtually all of the island. The company also owns 5,000 acres of Oahu and residential and commercial property in the U.S. Southwest.
The shareholder said the value of the Lanai holdings are dependent on factors such as the Hawaiian tourism economy, what state officials will allow Castle to build on the island and what individuals or other companies are willing to pay for pristine land on an undeveloped tropical isle.
Furtherfield, which Castle executives said has about 15,000 shares--a comparatively small holding, issued a statement saying “given Castle & Cooke’s unique real estate assets” the proposed buyout “is not in the best interests of the public shareholders.”
Echoing comments by analysts, Furtherfield manager Daniel Breen said, “The buyout price of $18.50 per share is a mere fraction of the company’s book value of $32.88 per share, and less than what the company itself paid for shares only two years ago in a Dutch auction tender offer when it characterized its stock as ‘undervalued.’ ”
Breen said he thinks the value of Castle’s real estate has appreciated well above its book value. He criticized Castle’s special committee, questioning whether it should have tried to obtain a better price.
Breen also suggested that shareholders might earn more through a liquidation of the company.
Castle declined to respond to Breen’s criticism.
Flexi-Van must obtain a majority of the shares it does not own to complete the deal. An investment group made up of the sons of Loew’s Corp. Chairman Laurence Tisch holds nearly 10% of the company, Franklin Resources owns 9.6% and Dimensional Fund Advisors owns 7.1%.
