Dole deal to put Total in €2bn league

Irish fruit and vegetable distributor Total Produce could be transformed into a €2bn company in the next five years on the back of its investment in US fruit giant Dole, according to analysts, writes Geoff Percival.

The former general produce arm of Fyffes — currently valued at just under €800m — saw its shares jump by more than 6%, before paring back, after announcing an agreement to buy 45% of Dole for $300m (€241m).

Total plans to raise around $150m from a share placing to partially fund the deal, which will be classed as a joint-venture and is being viewed as its biggest transactional move to date.

“I believe that this investment...is the single most positive step in our company’s history,” said Total Produce chairman Carl McCann.

“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,” he said.

Total is buying the stake from Dole chairman and owner David Murdock and has the option to buy another 6% in the next couple of years; and ultimately the entire company within five years. Initially, Mr Murdock will remain as chairman of the enlarged business, with Mr McCann acting as vice-chairman. Mr Murdock acquired a majority ownership of Dole in 1985.

Merrion analyst Darren McKinley said the deal could transform Total Produce, in value terms, over the next five years to around €2bn.

Upping his 12-month share price target on the company from €2.55 to €3.05, he called it a perfectly-timed “great acquisition” and the type of deal Total has been targeting for some time.

With around 75% of Total’s operations in Europe and 65% of Dole’s in the US, it will greatly enhance the Dublin company’s North American presence and expose it to value-added avenues like salad kits.

In its last financial year, the 12 months to the end of last October, Dole generated earnings of $237m and revenues of $4.5bn.

Total Produce said the deal will create the world’s leading fruit and vegetables group with the potential to realise synergies.

It added that the Dole tie-up continues a successful acquisition strategy which has resulted in a 325% shareholder return over the past five years.

Mr McKinley also sees Total continuing to grow through further small bolt-on acquisitions despite its expected continuing investment in Dole.

Total’s investment in Dole — which, itself, was linked to a purchase of Fyffes a number of years ago — follows its purchase of Californian business The Fresh Connection, for an estimated €10m-€15m, in November.