Forum determined that it would not provide
support for Dole appraisal rights because of the
risks created by disorderly investor competition
for interests. The buyout was
approved on October 31, 2013 by only 50.9%
of the company's unaffiliated shareholders, and
subsequently reported that claims for
appraisal rights exceeded the number of legally
Once is apparently not
enough for David H. Murdock, the chief executive of the Dole Food Company.
He has offered to acquire
the fruit company for $13.50 a share in a buyout that has been approved by
the board. The 90-year-old executive has done this before, and it’s a
maneuver he knows well.
But a lawsuit brought by
some shareholders in the Delaware Chancery Court is challenging the deal,
contending that it is rife with conflicts as Mr. Murdock uses his previous
experience at taking Dole private to his advantage.
Mr. Murdock, who dropped
out of the ninth grade and is worth about $2.4 billion, according to Forbes,
acquired a controlling interest in Dole in 1985. He first took part of Dole
private in 2000, when he acquired real estate assets previously spun off by
Dole. The real estate was mostly the Hawaiian island of Lanai, which he sold
Lawrence J. Ellison, the co-founder and chief executive of the software
Oracle, for a reported $300 million in 2012. Then in 2003, Mr. Murdock
took Dole private in a $2.5 billion deal. Mr. Murdock didn’t keep the
company private for long. Dole went public, raising $446 million.
It’s not just Mr. Murdock
who has returned to the deal-making table.
The cast of characters
seems to be a rerun of the 2003 buyout. For example, four of the directors
on Dole’s seven-member board, including Mr. Murdock, were directors when the
company was public the first time. Two of the directors are former or
current executives of Dole, with more than a decade at the company.
And Mr. Murdock’s advisers
— the law firm Paul, Hastings, Janofsky & Walker and
Deutsche Bank — played the same roles in the first buyout. Even the
lawyers for the special committee of independent directors, Sullivan &
Cromwell, were counsel to the underwriters on Dole’s 2009 I.P.O.
The shareholder lawsuit
contends that Mr. Murdock has used his connections to stack the deck in his
favor, pushing the special committee of independent directors to approve a
One of the special
committee directors, E. Rolland Dickson, served on the special committee
that approved the 2003 buyout. Not only that, but Dr. Dickson has been Mr.
Murdock’s personal physician.
Other members of the
four-person special committee are also thought to have outside ties to Mr.
Murdock. One, Elaine L. Chao, the former secretary of labor under President
George W. Bush, is married to Senator
Mitch McConnell, the Senate Republican leader, and Mr. Murdock has been
a big Republican donor. Ms. Chao was also on Dole’s board from 1993 to 2001,
rejoining the board after Dole’s I.P.O. in 2009.
Dr. Andrew J. Conrad, the
head of the committee, was appointed to the Dole board by Mr. Murdock in
2003, when the company went private the first time. He has also been an
adviser to the North Carolina Research Campus, a research center for cancer,
to which Mr. Murdock has donated $700 million.
While these connections
and relationships might appear to present potential problems, the directors
considered them and decided, according to a regulatory filing, that they
“would act in an independent and disinterested manner.” So there you have
The plaintiffs contend
that Mr. Murdock timed the buyout to come in a lull in Dole’s stock price,
one caused by asset dispositions as the business rebuilds. With a $1.7
billion sale of its Asian fresh produce business and global packaged food
business to the Itochu Corporation of Japan in 2012, Dole is now debt-free.
Back in the 2003 buyout, it was the 2001 sale of a Honduran beverage
business for $537 million in cash and the sale of Spanish and French
There are differences
between the current buyout and the one in 2003. This time around, Mr.
Murdock took the position that he would not sell his own 39.7 percent to
anyone else, a stance he did not take in 2003. In fact, at least one bidder
offered to pay $14 a share before the announcement of Mr. Murdock’s bid, but
there is no record of follow-up by the Dole directors.
Dole did not return calls
to comment for this column. But in a filing with the Delaware court, Dole
argued that the directors were disinterested and that “a special committee
of independent, disinterested directors — fully empowered to negotiate with
Murdock and say no — recommended the merger” and that “the special
committee’s financial adviser, Lazard Frčres & Co. L.L.C., which plaintiffs
do not contend is conflicted — determined the price is fair to Dole’s
Dole and its board also
argued that the deal was fair since it “remains subject to a vote of
Still, there is a
disturbing echo in this buyout process. Take the reason Mr. Murdock gave in
2002 for taking Dole private: “Operating
Dole Food Company Inc. as a private enterprise is the best alternative
given the public-market focus on short-term earnings and predictable
quarterly results. This will give the company greater flexibility to make
investment and operating decisions based on long-term strategic goals.”
Fast-forward to 2013. In
his buyout offer to the Dole board, Mr. Murdock stated: “Operating Dole Food
Company as a private enterprise is the best alternative given the
public-market focus on short-term earnings and predictable quarterly
results. This will give the company greater flexibility to make investment
and operating decisions based on long-term strategic goals.”
Yes, it is the same
language almost word for word. At least you would have thought that in the
decade since he could come up with some reason he took Dole public in
between. But then again, since it is all the same parties, why bother?
To be fair to Dole and Mr.
Murdock, this is not the first company to go private, then public and then
HCA, the owner of hospitals, for example has gone private and public
twice, earning the founding Frist family billions.
The idea behind a
take-private by management is that there is some value inherent in the
business being private rather than public. That is the idea at least, and we
saw that argument being made with
Dell, where a huge revamping is taking place and perhaps justified.
But in Dole’s case it
appears that Mr. Murdock is simply hitting the cut and paste key. In this
case, it is hard to see why this company should be private rather than
public, other than the same tired reasons that it is better for the long
Of course, the one reason
is price — shareholders will receive a good one that justifies selling. But
here the special committee appears not to have acted more strongly to look
at competing bids, leaving a higher bid on the table.
And so we are left with
shareholders deciding. The deal requires that a majority of all shareholders
other than Mr. Murdock approve it in a vote. Shareholders are typically
reluctant to take risk, so approval is likely. So the third time is likely
to be a charm for Mr. Murdock. One wonders if there will be a fourth, after
a seemingly inevitable I.P.O. a few years from now. If that happens, Mr.
Murdock can save on legal and bankers’ fees, since the documents are already
A version of
this article appears in print on 09/18/2013, on page B7 of the NewYork
edition with the headline: Dole Food’s Buyout in 2013 Looks a Lot Like One
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