Dole Foods merger with Total Produce hits setback as IPO price lowered

The imminent merger between Total Produce and US rival Dole Foods to form the world's largest fruit and vegetable supply business has suffered a minor setback, with the pricing of an initial public offering (IPO) of the combined group lowered.

Market sources said the price cut comes as a flurry of US stock market flotations vie for investor attention before the traditional summer IPO pause, and as peers of the new Irish company being listed have seen their share price decline in recent weeks.

Dublin-based Total Produce bought a 45 per cent stake in Dole Foods in 2018 and agreed in February to an outright merger between both companies to form a new group, called Dole plc, which will be headquartered in the Republic but listed on the New York Stock Exchange.

Dole plc set out early last week to raise between $470 million (€399 million) and $541 million in the IPO, with its investment bankers offering the shares at between $20 and $23 each.

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Majority owners

Dole Foods’ current majority owners, Los Angeles-based Castle & Cook (C&C), had also targeted a sale of $49 million to $56.5 million of Dole plc shares as part of the transaction in order to take some money off the table.

However, Total Produce said on Wednesday that the IPO range has now been cut to $16-$17, while the C&C shareholders have agreed not to sell shares into the market at this time. The price range amounts to a cut of 20 per cent at the lower end and over 25 per cent at the upper limit. Dole plc will be issuing more shares than originally planned to reach its fundraising target of about $500 million.

Shares in Total Produce plunged as much as 13.7 per cent to €2 on Wednesday as investors digested the IPO price reduction.

Banks and brokers managing and underwriting the IPO include Goldman Sachs, Deutsche Bank, Davy, Bank of America, BMO Capital Markets, Rabo Securities and Stephens.

The mid-point of the new IPO range points to a $1.62 billion market valuation for Dole plc when it floats. Dole may float as soon as Friday, though the timing could drift into next week.

Revised range

The aggregate ownership of Total Produce shareholders in Dole plc after the IPO will be reduced from 61.5 per cent to 57.1 per cent using the mid-point of the revised price range compared to the mid-point of the previously announced price range, the company said.

A flurry in US IPOs has seen companies raise a record $89 billion between the start of 2021 and the end of last week, up more than 230 per cent on the same period last year, according to figures from investment bank Renaissance Capital.

The total level of funds raised through US IPOs this year is expected to surpass the all-time high of $97 billion raised in 2000 amid the dotcom boom, it estimates.

Meanwhile, Dole plc’s main publicly quoted rivals, which would offer a benchmark for would-be investors, have seen their share prices drop in recent weeks. Belgian-based Greenyard, listed by Dole plc as its closest peer, has fallen by 8 per cent in the past month, while Florida-headquartered Fresh Del Monte has declined by almost 7 per cent in value.