Total Produce's Dole deal makes €7.4bn fruit and vegetables giant
Total Produce executive chairman Carl McCann has hailed as transformational a deal that will see it acquire a 45pc stake in Dole - and possibly the entire business within two years.
Stock market-listed Total Produce has agreed to pay $300m (€240.7m) for the holding.
It is entitled to immediately snap up another 6pc of Dole, if it wishes, for a total of $12m.
Two years from now it has an option to buy the outstanding 49pc at that stage for between $250m and $450m, depending on Dole's performance.
The initial deal places a $2bn (€1.6bn) enterprise valuation on Dole, which had $1.25bn of net debt at the end of 2016.
That figure is expected to fall below $1.2bn by the end of Dole's current financial year.
Total Produce - already one of the biggest fruit and vegetable distributors in the world - now has a partner that sees the combined Total Produce-Dole group catapulted far beyond its nearest rival in terms of scale.
Dole is the biggest banana distributor in North America, while Total Produce's biggest-selling category is stone and soft fruit.
Total Produce, with a market capitalisation of about €780m, had €3.8bn in revenues during 2016 and Dole's hit $4.45bn (€3.57) in the 12 months to the beginning of last October.
The entire group will sell hundreds of millions of cases of fruit a year, from bananas to pineapples, as well as salads and other products.
The combined €7.4bn revenue figure eclipses the €3.9bn in sales generated by Belgian company Greenyard, which was also believed to be in the running to acquire the Dole stake.
Total Produce posted adjusted earnings before interest, tax, depreciation and amortisation (ebitda) of €94.8m in 2016, whole Dole's adjusted ebitda in the 12 months to last October was $237m (€190m).
The holding in Dole is being sold by 94-year-old David Murdock, who has controlled the company since 1985.
Mr McCann will become vice-chairman of Dole, while Mr Murdock will remain chairman.
Speaking to the Irish Independent, Mr McCann declined to comment on whether Total Produce plans to exercise its rights to increase its Dole stake and to eventually acquire it. However, market expectations are likely that Total Produce will move to do so.
Mr Murdock visited Dublin to sign the deal with Total Produce on Wednesday evening.
For 30 years he's been a family friend of the McCanns, who have been linked to both Total Produce, and previously fruit company Fyffes, for more than 60 years.
The McCanns own about 12pc of Total Produce, while Fyffes is now owned by Japanese firm Sumitomo.
Mr McCann said Total Produce was "flattered" to have been selected by Mr Murdock.
"We've known them for 30 years and personal relationships are very important in these things," he said.
"We tried to do many different things. This time out we were the fortunate party to be selected in the end."
Management teams, including Total Produce chief executive Rory Byrne, will remain in place at both companies.
As part of a landmark deal unveiled yesterday, the McCann family stumped up €27m in equity as Total Produce raised €145m from a share placing to fund the acquisition of the 45pc stake in Dole.
Goldman Sachs and Davy are bookrunners for the placing.
Rabobank has provided a $300m bridging loan to Total Produce.