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Murdock’s earnings unveiled in filings to take Dole public

By Emily Ford
eford@salisburypost.com
KANNAPOLIS ó Privately held by David Murdock for the past six years, Dole Food Co. last week published Murdock’s salary, company risk factors and other information when it filed to go public.
Last year, Murdock earned just under $2.7 million, including $968,269 in salary and a $1.2 million bonus, according to a form filed with the U.S. Securities and Exchange Commission.
Dole paid Murdock a $541,500 incentive as part of the company’s three-year growth plan, as well as $33,057 in additional compensation.
His perks included a $5,000 car allowance and an annual subscription to the New York Metropolitan Opera worth $27,687.
Since the 86-year-old businessman is over age 701/2, he received $208,604 in retirement from Dole last year.
Dole and Castle & Cooke, Murdock’s real estate development company, co-lease a jet for his business travel. The plane cost Dole $2.2 million last year.
Forbes ranked Murdock No. 183 on the magazine’s list of the world’s billionaires and estimated his net worth at $3.3 billion. Murdock lost $1.4 billion last year, the magazine said.
He stands to make significant money when Dole goes public, although the number and price of shares he will sell has not been released.
Murdock is expected to spend more than $1 billion developing the N.C. Research Campus in Kannapolis. Lynne Scott Safrit, who oversees the project, told the Post that her boss’ obligations in Kannapolis did not necessitate the Dole sale.
Analysts who follow the produce giant reacted favorably to news that Dole would return to public trading. The company hopes to raise $500 million with the stock sale.
“It’s a very smart move,” said Jim Prevor, editor in chief of industry Web site PerishablePundit.com. “This gives them more financial flexibility and the liquidity that are necessary in today’s industry.”
Murdock, who acquired Dole in 1985 when he bought Castle & Cooke, took Dole private in 2003 in a deal valued at $2.5 billion.
Murdock has a long and varied history in Rowan and Cabarrus counties.
He owned textile giant Cannon Mills from 1982 to 1986, when he sold it amid cries of foul play. The mill eventually went bankrupt in the largest layoff in state history, throwing 4,300 local people out of work.
Murdock bought back the sprawling, shuttered Cannon Mills Plant No. 1 in 2004 in downtown Kannapolis, demolished it and built the $1.5 billion Research Campus, a biotechnology complex devoted to human health, nutrition and agriculture.
In international media coverage of Dole’s planned initial public offering, the fledgling Research Campus, which Murdock calls his legacy, has received cursory mention.
Dole will use proceeds from the stock sale for debt relief and other corporate interests, according to its registration with the federal government. The sale could fund acquisitions, new products or expansions.
Despite an aggressive debt-reduction program that included paying off $480 million over the past five quarters, the company still owes about $2 billion.
“They’re loaded with debt,” said John Fitzgibbon, the founder of IPOScoop. com, a New Jersey-based initial public offering rating service. “But the bankers must think they have something or they wouldn’t advise them to go public.”
Taking a company public costs millions of dollars, Fitzgibbon said.
“They’re not just sticking their toe in the water to see what the temperature’s like,” he said. “Whenever anybody files to go public, they are very serious about consummating the thing.”
Dole had revenue last year of $7.2 billion and net income of $92 million.
The company holds the No. 1 or No. 2 market share in much of the world for most of its key products, including bananas, pineapples and packaged salads and fruit.
That makes the public offering more attractive to investors, said Prevor with the PerishablePundit.com.
“In today’s environment, people like investing in well-known brand names,” Prevor said. “This is actually a relatively easy offering to sell in this market. The $64,000 question is not can they raise the money, but at what price.”
Prevor said he expects Dole to surprise observers and raise even more than $500 million with the sale.
“Dole is a very solid company,” he said. “But it’s not going to be the next Google.”
Fitch Ratings in Chicago approves of the proposed public offering, as long as a “material” amount of the proceeds are used for debt reduction, director and credit analyst Carla Norfleet Taylor said.
Fitch has five ratings for various segments of Dole’s debt, ranging from C to B-plus.
Taylor said she hopes to see debt reduction of at least 10 percent after the sale.
Before the sale, Dole will consider changing some legal structures, which could delay the public offering but create a more efficient company, Taylor said.
Alternatives could include a merger or other combination with DHM Holding Co., Dole’s parent company owned by Murdock, and its affiliates, she said.
Regardless, with two selling shareholders ó Dole and Murdock ó potential investors won’t know the stock price for some time.
“This is not straightforward,” Taylor said. “It’s going to take some time for this to play out.”
In a related development, Dole has postponed a $325 million debt sale due to market conditions, according to IFR, a Thomson Reuters service.
Separate from the public offering, Dole announced Aug. 14 that it planned to offer seven-year secured notes to private buyers and use the proceeds to reduce the company’s debt.
But Dole postponed the sale Monday as junk bonds sold off and stocks suffered their worst loss in seven weeks.
KDP Investment Advisors suggested that the company would reschedule the debt sale in the near future.
As required for the consideration of potential investors, Dole outlined the company’s risk factors when it filed for public offering.
Risks listed by the company include:
– Lawsuits related to the company’s former use of the pesticide DBCP. Nicaraguan workers on Dole banana farms claim to have been rendered sterile by the pesticide.
A number of lawsuits are pending in the United States and other countries against manufacturers of DBCP and growers, including Dole, who used it.
– Dole uses herbicides and other potentially hazardous substances that may lead to environmental damage.
The company may have to pay for costs or damages associated with the improper application, accidental release or the use or misuse of such substances.
– Dole anticipates that the Internal Revenue Service will challenge its tax treatment of the going-private merger transactions in 2003 when Murdock bought the company, which could result in a “material tax liability.”
– Adverse weather conditions, natural disasters, crop disease, pests and other natural conditions, can impose significant costs and losses on the business.
– Operating in numerous countries throughout the world carries risks, such as currency exchange fluctuations, political changes and economic crises, as well as legal and regulatory changes.
– Dole’s substantial debt could adversely affect operations, including the company’s ability to perform under debt obligations.
Dole may incur significant additional indebtedness or be unable to generate sufficient cash flow to service its debt.

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