Mad Money

Dole Foods Ripe for IPO


Dole Foods will reenter the public market this week, Cramer said Monday, and the stock “should probably trade at a premium to the other produce companies.”

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Dole, trading under the ticker symbol DOLE, is expected on Wednesday to price 35.7 million shares between $13 and $15. He urged investors to “buy as much as you can get your hands on at that level.” If Dole were to trade inline with its peers, such as Chiquita and Fresh Del Monte , the stock would be worth $20.37, or about 46% higher than the midpoint of that range. But he thinks DOLE is a better company than those two.

Know Your IPO

Dole Foods is either number one or two by market share in most of the categories in which it competes. Two-thirds of its packaged-food products are still on the shelf nine years after launch, while competitors find success only 20% of the time – after just one year. Also, seventy percent of Dole’s sales are from fruit, and Cramer predicts that as the world gets wealthier that business will continue to grow. A fun factoid to back it up: The developed Western world eats twice the fruit per capita than most developing countries.

Management at Dole was smart about its balance sheet, too, paying down debt to $1.6 billion from $2.3 billion. Also, the IPO’s proceeds will go to clearing up still more debt, and the next bond maturity isn’t until 2013. 

Speaking of management, Chairman David Murdoch plans to retain 59% of the company’s ownership even after the offering. And he’s not selling a single share either. The fact that a profit-hungry private-equity firm isn’t behind this deal is a key selling point for Cramer.

So how do you play it? Make sure you get in on the actual offering. There’s no point in paying up for the stock, or worse, chasing it in the aftermarket.

“I know my IPOs,” Cramer said, “so you’d better pay attention when I tell you to try to get some Dole Foods.”

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