Castle & Cooke Will Sell Flexi-Van Majority to Itel

Castle & Cooke said Wednesday that it has agreed to sell slightly more than half of its Flexi-Van operations to Itel Corp. for about $215 million in cash, notes and stock.

Los Angeles-headquartered Castle & Cooke will record a $33.9-million after tax loss on the sale of Flexi-Van’s shipping container leasing business. The loss was recognized in the company’s fourth quarter, resulting in a $31.9-million loss for the period compared to a $3.3 million net loss in the fourth quarter of 1985.

For the fiscal year that ended Jan. 3, Castle & Cooke had net earnings of $43.9 million compared to the $46.4 million it would have earned as a single company in all of 1985. Revenue rose to $1.74 billion in 1986 from $1.6 billion the year before, when Flexi-Van of New York and Castle & Cooke, then based in Honolulu, merged.

After the $600-million merger, Los Angeles financier David H. Murdock, Flexi-Van’s chairman and largest shareholder, became chairman and chief executive of Castle & Cooke, which moved its headquarters to Los Angeles.

Under the agreement announced Wednesday, Itel, which is based in Chicago, will pay $128 million in cash and marketable securities, $37 million in notes, and 3 million shares of Itel stock. The stock, which amounts to slightly more than 10% of Itel’s outstanding shares, is subject to a 10-year standstill agreement, under which Castle & Cooke cannot buy any more Itel stock.

In 1986, Flexi-Van’s container-leasing operations generated $71 million of revenue while operations involving the leasing of chassis and other transportation equipment brought in another $62 million, the company said.

“This sale will permit Flexi-Van to concentrate on its chassis leasing business, an operation that has been profitable for us, while also allowing us to participate in the benefits of the newly combined container-leasing business through our ownership of Itel stock,” Murdock said in a statement.

Raymond Henze III, executive vice president of Castle & Cooke, said the container leasing business has been profitable but has suffered from a proliferation of competitors and an oversupply of containers. “We felt if two container companies merged, they would be able to provide better service to the customer at a lower cost,” he said.

Itel spokesman Gary Hill said the merger will double Itel’s size to about $500 million in assets and 370,000 TEUs (20-foot equivalent units), the industry’s term for capacity.

“Basically, Flexi-Van is the same size as we are in terms of being the fourth- or fifth-largest lessor of containers,” he said. The similar operations will be able to eliminate redundancies and operate at lower cost after the merger, he said.

Analyst Charles R. Bureker, who follows Castle & Cooke for the San Francisco investment firm of Sutro & Co., called the sale “a very good move.” Castle & Cooke has been able to get substantial amounts of cash from Flexi-Van through the depreciation primarily of containers and the money has been used to help pay off part of the company’s debt, he said.

“I was not surprised (by the sale) because I thought Flexi-Van had, in a sense, served its purpose,” Bureker said.