Dole Food Company, the world's largest fresh produce company, has secured a deal to sell its fresh produce division in Asia, Dole Asia Fresh Produce, as well as its international packaged goods business, to Japanese group Itochu Corporation in a deal worth US1.685bn (€1.28bn).
The agreement, signed by Dole chairman David Murdock and Itochu's president and chief executive officer Masahiro Okafuji, is understood to give Itochu exclusive rights to the Dole brand on the fresh produce it grows, sources, ships, distributes and sells in Asia, Australia and New Zealand, as well as on the company's packaged food products worldwide.
While some of the proceeds from the sale, which follows a major stategic review of Dole's entire business, will be used to reduce its debt and to restructure its remaining operations, the company is now set to embark on a further round of cost-cutting and streamlining which it predicted would enable it to save US$50m (€38.1m) annually.
"In connection with the transaction, Dole expects to adopt cost-saving initiatives and corporate restructuring in order to right-size the company," it said in a statement. "Dole will realign and streamline its global personnel and corporate structure to conform to the specific needs of the remaining fresh produce businesses.
The company said it expected to fully implement such measures "by the end of fiscal 2013".
Following a series of disappointing results over the past couple of years, caused mainly by falling demand for key products like bananas in its North American and European markets, Dole has come under pressure to make changes to its business strategy.
The fact that it has opted to divest its fresh produce business in Asia, a part of the world widely regarded as offering excellent prospects for future growth, underlines the importance to Dole of stabilising its operations closer to home.
"When we announced our strategic business review in May, we stated that we would review a broad range of strategic alternatives for our businesses with the goal of enhancing shareholder value," commented David DeLorenzo, Dole’s president and chief executive offer.
"We believe this proposed transaction accomplishes that. We are realising a premium valuation for our worldwide packaged foods and Asia fresh produce businesses and will retain a strong fresh produce business that has increased financial flexibility to grow."
Dole insisted it would remain an international company, retaining as it does its entire North American fresh vegetables business as well as its fresh fruit divisions in North America, Latin America, Europe and Africa.
Crucially, the deal is expected to help Dole achieve more favourable terms on any loans it needs to secure in future.
"The consummation of this transaction will result in a more focused Dole that retains significant scale with more than US$4bn (€3.04bn) in revenue and a rich asset base," said Murdock.
"With a substantial reduction in debt and the expected cost savings, Dole will also be well positioned to take advantage of growth opportunities within the fresh produce category."