The agreement values fruit firm Dole at an enterprise value of approximately €1.6bn ($2bn), giving a transaction multiple of around nine times Dole’s adjusted EBITDA. In the 12 months to 7 October 2017, Dole generated sales of €3.6bn ($4.46bn)and adjusted EBITDA of €1.9m ($237m).
Announcing the deal, Total Produce said the transaction brings together two of the world’s leading fresh produce companies, which benefit from “complementary market positions” in various product segments and geographies.
Acquisitions give earnings lift
The Irish produce giant noted the transaction is a “significant step” in its history, representing a continuation of its acquisitive expansion strategy.
“I believe that this investment by Total Produce in Dole is the single most positive step in our company's history. It places Total Produce at the forefront of our industry, and we anticipate it will create significant additional value for shareholders in the years ahead,” chairman Carl McCann said.
Total Produce has been growing its business though M&A. Recent deals have included taking positions in The Fresh Connection, Oppenheimer Group and Progressive Produce. The company also formed a Nordic joint venture with local partner G. Kramer & Zonen.
In its first half financial update, released in August, Total Produce reported that acquisitions had led to a 12% jump in group revenue.
The acquisition is expected to generate “low double digit” adjusted earnings per share accretion for Total Produce in the first full fiscal year post closing, Total Produce predicted.
Fresh expected to ‘outperform’
Total Produce is increasing its share of the global fresh fruit and vegetable sector. The company said this category is expected to “outperform” packaged foods, driven by a structural shift towards healthy eating and snacking.
In Dole, Total Produce sees an “iconic band” with “leading market positions and scale”. Dole has number one and number three positions in bananas in the US and Europe respectively.
Dole will continue to operate its “business as before”, led by its “very highly regarded” management team. David Murdock, who has held a majority stake in Dole since 1985, will continue to chair the group’s board but Total Produce will share governance rights, including equal board representation. This structure will provide Total Produce with “flexibility” on the “path forward”, the company suggested.
Plan for growth
Total Produce and Dole have jointly agreed to a strategic plan to expand the business in the years ahead. Dole and Total Produce expect to deliver annualised synergies and cost savings at Dole of €12-16m ($15-20m) in the short term and €28m ($35m) over the medium term.
Dole and Total Produce said they remain committed to deleveraging Dole’s balance sheet, which has seen high debt levels hamper Dole’s financial performance. This will be achieved through organic cash flow generation, focused investments and working capital management, active portfolio management and review of non-core assets, the companies said.
The deal has been reached after talks between Dole and another European produce group, Belgium’s Greenyard Foods, fell through earlier this month.