Dole, the fruit and vegetable company best known for its banana brand, is scouting the market for potential acquisition targets and working to streamline its operations after combining with Total Produce PLC and listing on the New York Stock Exchange.
In 2018, the company that previously operated as Dole Food Co. agreed to sell itself to Total Produce, which initially acquired a 45% stake. In July, Total Produce bought the rest of the business and the combined company began trading on the public markets as Dole PLC.
The initial public offering provided Dole with just under $400 million in new equity, which the company used to pay down costly debt and strengthen its balance sheet. The company also arranged $1.44 billion in new financing, including a term loan and a revolving credit facility.
Frank Davis, chief financial officer of Dole.
Photo: Dole PLC
“Dole was heavily indebted and had a lot of expensive debt,” said Chief Financial Officer Frank Davis, who previously served as finance chief of Total Produce.
The combined business had pro-forma revenue of $9 billion for 2020 and the company has said it expects 2021 revenue of between $9.2 billion and $9.4 billion. Dole, which had $4.7 billion in total assets as of Sept. 30, is looking to grow its business, including through bolt-on acquisitions, Mr. Davis said.
Total Produce, which was formed in 2006 after a split from banana-grower Fyffes PLC, has completed over 100 acquisitions since its inception, according to Mr. Davis, often by taking a minority stake and growing it over time. The combined Dole is now scouting the market for targets in the U.S. as well as in other countries and wants to acquire assets in fast growing categories, including avocados and berries.
The company is forecasting it can achieve $30 million to $40 million in annual synergies over a three- to five-year period in areas such as sourcing and shipping, Mr. Davis said. The company said the savings won’t come from cuts to its more than 40,000 employee workforce. Dole also expects it will save about $40 million a year in interest costs after its recent refinancing.
Its leverage ratio, calculated as the ratio between net debt to earnings before interest, taxes, depreciation and amortization, stood at 2.76 times at the end of the third quarter, down from over 5 times before Total Produce became an investor, according to Mr. Davis. The combined company is targeting a leverage ratio of around 3 times, he said.
“We have significant headroom to be able to do acquisitions,” Mr. Davis said. The company reported net debt of $1.13 billion at the end of September, down from $1.51 billion at the close of March.
Dole will likely act as a consolidator in a fragmented market, said Roland French, an equity analyst at Davy Research, the research arm of the wealth management company Davy Group.
“The IPO transaction allowed the company to de-lever the Dole balance sheet, which is a key part of the growth story in the context of driving future M&A,” Mr. French said. Being part of a bigger entity will allow Dole to get better freight and procurement rates and drive revenue synergies, he added.
Like other food businesses, Dole is facing higher costs for labor and logistics. The company, which has raised prices on certain salads and fresh vegetables, is considering more increases if inflation persists, its finance chief said. “Everybody in the wider industry is experiencing this,” Mr. Davis said.
The Aztec is one of 13 ships owned by Dole.
Photo: Dole PLC
The company owns 13 container ships to transport bananas, pineapples and other products and operates 11 of those ships itself.
“By owning and controlling our own fleet of ships and containers, we aren’t as exposed as others,” the CFO said, adding the company will continue to search for ways to offset recent cost increases.
Write to Nina Trentmann at [email protected]
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