Sneaky Move from CEO of our Watchlist Company?

By Travis Johnson, Stock Gumshoe, June 11, 2013

Nonagenarian Dole CEO David Murdock wants to take his company private. That company, Dole Food (DOLE), has been on our watchlist for six months or so, and was also suggested as a value play by one of the speakers at the Value Investing Congress in May.

The pitch for DOLE as a value investment has been that they just dramatically improved their balance sheet by selling their Asian operations, and they have an excellent duopoly in pineapples and bananas and hugely valuable land around the world, particularly in Hawaii (including some developable land near Honolulu that they carry cheap on their books).

The company is not cheap based on earnings or EBITDA measures, so the idea was that they would leverage some of their assets, continue streamlining the business, and recognize value that way … with the lingering possibility that since the CEO is 90 years old and controls almost a majority of the company, they are likely to get bought out in some kind of deal as part of his retirement/estate planning procedures.

But apparently David Murdock is ready to live almost forever, and he wants his company back — he made a bid to buy the rest of DOLE that he doesn’t own at about $12 a share this morning.

Is it a coincidence that Murdock and management also shifted the course of the company a little bit in recent weeks, announcing that they were stopping their large share buyback program (which they had just announced recently) and instead investing in new ships? That drove the shares down from $11 to about $9.25 just a few days ago … so now a $12 bid looks perhaps more appealing to shareholders than it would have back in February when the shares were at … $12. Or even mid-May, when they were above $11.

That doesn’t smell particularly attractive to me, and maybe shareholders are sensing the same thing — Murdock’s trying to get a lowball bid through after driving down the shares. That’s perhaps why they’ve bid DOLE shares up to about $12.50, above the offer price, in pre-market trading.

I was watching DOLE and hoping for the kind of washout that we saw last week to continue to turn it into a real “hidden bargain” kind of stock — now it’s too bad that I didn’t jump on it when it dipped below $9.50 when the ...

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