Dole Food sells two businesses to Itochu for $1.7 billion

Tue Sep 18, 2012 2:37am EDT
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By Aaron Sheldrick

TOKYO (Reuters) - Dole Food Company Inc DOLE.N will sell two businesses to Itochu Corp 8001.T for $1.7 billion in cash - a deal that will help the world's largest fruit and vegetable producer pay down its heavy debt load while expanding Itochu's food presence in new markets such as China.

Dole has been struggling with volatile demand and low prices for bananas, its biggest-selling product. The sale of its worldwide packaged foods and Asia fresh produce businesses is set to result in a significant reduction in its $1.7 billion of net debt, as well as pay for restructuring costs.

By contrast, Japanese trading houses are keen to diversify their profit streams away from energy and mining-related businesses and have stepped up overseas acquisitions thanks to a strong yen and flush reserves of cash.

"Growth in the Japanese market will be slow, but there are growth opportunities in China, where Itochu has distribution networks like the Ting Hsin Group, as well as other Asian markets," said Akio Shibata, president of the Natural Resources Research Institute.

Japan's third-largest trading company has a stake in Ting Hsin, China's country's biggest food distribution company and the purchase will also give it Dole's ripening and distribution centers in the east and northeast of the world's most populous country. It has distributed Dole products in Japan for nearly half a century.

Itochu will also gain control of plantations growing bananas and other fruits, canneries and processing factories in Asian countries, including China, South Korea, Philippines, Taiwan and Thailand. It will have exclusive rights to the DOLE trademark on packaged food products worldwide and on fresh produce in Asia, Australia and New Zealand.

Tensions between Japan and China over disputed islands have sparked growing anti-Japan demonstrations but are unlikely to have a major impact on Itochu's plans to expand through its Dole assets as Itochu doesn't have a big brand presence in China, a separate analyst said.

"Itochu's brand is famous in the industry but not among the general public," the analyst said, requesting anonymity due to the sensitivity of discussing China.   Continued...

A Dole vessel transporting containers with boxes of bananas is anchored at Dole's Port in Guayaquil in this February 23, 2012 file photo. Struggling Dole Food Company Inc has agreed to sell its worldwide packaged foods and Asia fresh produce businesses to Japanese trading house Itochu Corp for $1.7 billion in cash. REUTERS/Guillermo Granja/Files