Investor Group Makes $238-Million Bid to Acquire Di Giorgio

Di Giorgio Corp., an old-line San Francisco firm involved in food processing, building products and real estate, said Monday that it is the target of a $238-million takeover offer from an investment group affiliated with New York money manager Mario Gabelli.

Analysts were not impressed with the $28-a-share bid and expect better offers to surface. “I think it understates what the company is worth,� said analyst Kevin B. Skislock with Rotan Mosle, a Houston investment house, who estimated Di Giorgio’s breakup value at $35 to $40 a share. “There is room for management to come in and make a better offer,� he said.

Wall Street seemed to agree that a better offer was in the works--Di Giorgio stock moved up $3 on the New York Stock Exchange to close at $30 a share--a 52-week high. Volume was a heavy 224,600 shares.

Di Giorgio, well rooted in the San Francisco Establishment and founded as a family-run fruit grower and distributor, is seeking an investment banker to advise it on the bid, said Richard E. Mellor, the company’s general counsel.

The group making the offer, Gabelli/Rosenthal & Partners LP--which specializes in leveraged buyouts--and G&R; Partners, already owns 370,700 Di Giorgio shares, or 4.36% of the company’s approximately 8.5 million shares of common stock.

An additional 24.23% of the company’s outstanding stock is owned by clients of Gabelli’s investment company--GAMCO Investors Inc.--and by mutual funds managed by GAMCO. Gabelli is noted for seeking stocks that are selling for less than the value of the companies’ underlying assets.

Under the buyout proposal submitted to Di Giorgio late last Thursday, stockholders would receive $20 in cash and $8 in securities--notes and common and preferred stock--in a restructured company for each share of Di Giorgio common. The offer is set to expire July 17.

Di Giorgio management, members of the family and some company directors would be invited to remain with the firm and participate in the buyout, said Kevin Murphy, who is directing the bid for Gabelli/Rosenthal. “This is not a hostile� offer, he said.

Di Giorgio has spent the past five years shedding various marginal subsidiaries--such as TreeSweet Products, Sun Aire Airlines, a sawmill and video-game distributors. The firm has concentrated on its most profitable building product and food processing and distribution business.

But the profitability of those divisions has been offset a bit by the poor performance of its 10-year-old real estate division, which loses about $3 million to $3.5 million a year. The company is developing a resort community on part of 6,000 acres in Borrego Springs, Calif., and another 2,300-acre residential development near Sacramento.

Edward M. Cimilluca, an analyst at Shearson Lehman Bros., said: “The real estate losses tend to detract from the quality of the food operations. . . . They have a good business masked by a poor business.�