Dole Food Co. has said the sale of its global packaged food and Asian fresh businesses to Itochu Corp. will cut its debt and allow it more “flexibility” to look at growth opportunities.

The US produce group announced the US$1.7bn deal yesterday (18 September), following admissions from both companies last week that they were in talks over the assets.

Dole’s business will now comprise its North American and European fruit businesses and its North American vegetables division.

On a conference call following the announcement of the transaction yesterday, David DeLorenzo, Dole’s president and CEO, said expected cost savings from the deal should result in savings of US$50m annually. This would reduce net debt to around $200m, he added.

“This will involve reducing the size and scope of corporate overheads and realigning [Dole’s] remaining fruit and vegetable business.”

DeLorenzo said the $50m annual savings will “ensure our earnings are optimised”, adding that the company sees a number of options internally for growth.

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“We do see a lot of opportunity for growth in a number of areas of our business in South America, those markets are improving, in Chile, we have a nice business in Africa. And in South Africa where in the past we have seen opportunities but we haven’t been growing too quickly and also in organics. So there are lots of internal opportunities that we see and we will have the flexibility to go beyond that if something looks attractive.”

DeLorenzo said the company was not looking at selling any other of its assets at the present time.

“Right now we are fully looking at trying to finalise this transaction so we are not looking at anything at this moment. We have had during this process a number of discussions in a number of areas, but going forward in the next few months we are concentrating on this transaction.”

Janney analyst Jonathan Feeney said the timing of the spin-off reflects a “bullish outlook” for Dole’s banana business.

“While prolonged weakness in Europe has depressed results in global bananas for some time and macro headwinds remain, we don’t believe there is any reason to anticipate any marginal deterioration in the industry’s return profile in recent years, which is what is emphatically reflected in valuation. Recently good trends in European spot banana prices and signs of tightening supply could provide catalysts in the months ahead.”

BB&T Capital Markets analyst Heather Jones increased her full-year 2012 EPS estimate slightly to $1.31 from $1.30, and introduced a full-year 2013 estimate of $1.20.