China’s competition officials are still weighing Dole Food Co’s deal to sell its global packaged food and Asian fresh businesses to Japan’s Itochu Corp, forcing the two firms to delay completion of the sale.
Dole had hoped to sign-off on the US$1.68bn sale by the end of 2012, but the fresh produce giant said today (3 January) it is now aiming for early 2013. China is the only one of seven countries that has not yet approved the deal.
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Any delay will be unwelcome in the Dole boardroom, where directors are keen to get the deal done to pay off debts and move forward with further restructuring.
It is not the first time China’s Ministry of Commerce has taken a cautious approach to deals encroaching upon its territory, most recently having delayed Glencore’s $6bn acquisition of Viterra.
“We have been engaged in a very active dialogue with the Chinese regulatory agency, and we will continue to seek approval at the earliest date possible in 2013,” said Dole’s executive vice president and general counsel, C Michael Carter. “We are confident that there are no competition issues that would complicate receiving antitrust approval in China.”
Carter, who will also become Dole’s president and COO following the sale, said bthe firm plans to use proceeds from the sale, plus a newly-agreed $400m term loan, to pay off existing debts of around $1.7bn. The group also intends to exit its Japanese yen hedges and put aside funds for post-deal restructuring.
Following the sale, Dole estimates its net debt to EBITDA ratio will be 1.8. “We will benefit from a significant reduction in interest expense,” said Carter.
Meanwhile, Dole is considering further restructuring amid a difficult time for its fresh fruit unit, particularly due to what Carter called “aggressive contract negotiations in the North American banana market”.
He added: “The fresh fruit business of the new Dole is continuing to experience declining earnings in a continued difficult economic environment.” For 2013, Dole said it expects its new-look business to generate between $45 and $60m in profits from continuing operations.
