This morning, the iconic food producer Dole Food Company filed its S-1 for an initial public offering. The terms of the deal have not set (they should within the next month or so) and no ticker symbol has been announced. Morgan Stanley (NYSE:MS), Bank of America Corp (NYSE:BAC) and Deutsche Bank AG (USA) (NYSE:DB) are underwriting the deal.
Keep in mind that Dole Food went private back in 2013, at a valuation of roughly $1.6 billion. The deal was led by David H. Murdock, who has been involved with the company since the mid-1980s, when it was part of the ailing Castle & Cooke.
And yes, he wasted little time in reinvigorating the Dole Food operation, making it the world’s largest producer of fruits and vegetables. As of now, Murdock is 94 and is the chairman of the board of the company. To this day, Dole has several key advantages,. such as:
- Strong Market Positions: The company holds the No. 1 position for conventional and organic bananas in North America and is No. 2 with pineapples. As for Europe, Dole Food is ranked No. 3 for both of these fruits.
- Diversification: Dole Food is more than just about bananas and pineapples. The company has over 180 products that are sourced from 20 countries.
- Distribution: It is massive, with a network that spans North America, Europe, Latin America, South Africa and Dubai.
- Brand: It is definitely widely known and respected across the world. According to research from IPSOS, the brand has 63% unaided consumer awareness, which is 25% higher than company’s closest rival.
- Supply Chain: It is extensive, with the ownership of 124,000 acres of farmland as well as manufacturing plants, pack houses and even ships (there is a fleet of 15 refrigerated vessels). Such assets are critical in providing high-quality products.
What’s more, since going private, Dole has embarked on a transformation of the company. As should be no surprise, a key part of this has been cost-cutting and productivity efforts.
There have also been the unloading of non-core assets. In fact, with the savings, Dole Food has been reinvesting in its farmland holdings and also improving the overall infrastructure.
As a result, the company has shown nice improvements in adjusted Ebitda, which has gone from $105.7 million in fiscal 2013 to $215.6 million in fiscal 2016.
Oh, and there is something else that should be encouraging for the Dole Food IPO — that is, the positive market dynamics. No doubt, there has been a move toward healthier food. For example, according to TechSci Research, the growth rate for spending on organic food has been about 13% for the past 20 years.
Bottom Line on the Dole Food IPO
For the most part, it’s tough to gauge the reception of the offering. Again, the pricing has yet to be set.
But it is important to keep in mind that the IPO market has continued to be fairly light this year, except for a few high-profile deals like Snap Inc (NYSE:SNAP).
So a brand like Dole Food should be able to stand out. What’s more, the handful of food-related IPOs have done fairly well. For example, US Foods Holding Corp (NYSE:USFD) has gained about 20% since coming public in late May 2016.
So all in all, it seems like a good bet that the Dole Food IPO should also get a warm reception from investors, especially considering the company’s strong portfolio, deep infrastructure, trusted brand and the substantial improvement in cash flows.
Tom Taulli runs the InvestorPlace blog IPO Playbook as well as OptionExercise.com, which provides interactive tools & services for employee stock options of pre/post IPO companies. Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.