Dole Food to sell two businesses to Itochu for $1.68bn

US-based Dole Food has entered into a definitive agreement with Japanese trading house Itochu to sell its worldwide packaged foods business and Asia fresh produce business for $1.68bn in cash.

Dole plans to use the cash proceeds from the transaction to lower debt, pay deal-related expenses, and implement a restructuring plan, which is expected to be completed by the end of fiscal 2013 and generate cost savings of $50m annually.

Dole’s worldwide packaged foods business offers fruit parfaits, canned pineapple juice, canned pineapple, fruit juice concentrate, fruit in plastic cups, jars and pouches, healthy snack foods and frozen fruit.

Its fresh produce business grows, sources, and ships fresh fruit and vegetables, primarily in Asia.

In 2011, the combined businesses reported an adjusted earnings before interest, taxes, depreciation and amortisation (EBITDA) of $190m, and revenues of approximately $2.5bn.

The transaction, which is subject to approvals from Dole stockholders and regulatory authorities in several countries, is expected to be completed in the fourth quarter of the 2012 fiscal year.

Following the completion of the deal, Itochu will have exclusive rights to use Dole trademark on packaged food products worldwide and on fresh produce in Asia, Australia and New Zealand.

Dole Food Company will continue to own its fresh vegetables business and fresh fruit businesses in North America, Latin America, Europe and Africa, which together posted revenues of $4.2bn in fiscal 2011.

The company has been affected by volatile demand and low prices, and its net income from continuing operations fell about 21% to $66m for the second quarter ended 16 June 2012.

In May 2012, the firm began evaluating strategic options, and in July 2012, it announced plans for a complete or partial separation of one or more of its businesses, including potential spin-offs, sales transactions and joint ventures.

Itochu, which is involved in several business including textiles, machinery, chemicals and food, expects to post a net profit of JPY280bn ($3.6bn) in the year ending to March 2013, of which about 15% is forecast to come from its food business, and 40% from its metals division.

Recently, Itochu noted that it is in talks to acquire Dole businesses and added that it will establish a new company in November 2012 to acquire and manage the businesses if a definitive agreement is signed.

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Image: Dole Food chairman David H Murdock signs a definitive agreement with Itochu CEO and president Masahiro Okafuji to sell Dole’s worldwide packaged foods and Dole Asia fresh businesses. Photo: courtesy of Business Wire.