(Bloomberg) – Dole Food Co., the world’s largest producer of fresh fruit and vegetables, retreated in its first day of trading after becoming the fifth U.S. company since September to cut its initial public offering price.

Dole slid as much as 47 cents, or 3.8 percent, to $12.03 as of 10:40 a.m. in New York Stock Exchange composite trading. The Westlake Village, California-based company raised $446 million selling 35.7 million shares for $12.50 each yesterday, according to a sale document. Dole, which sells fresh bananas and pineapples, packaged spinach and canned fruit, had planned to price the stock at $13 to $15 a share, an Oct. 9 filing showed.

The IPO valued Dole at $1.09 billion as its shares traded today after a six-year hiatus. Chairman David Murdock took Dole private in 2003 after rescuing the food producer, founded in Hawaii in 1851, from bankruptcy more than two decades ago.

“Historically, deals that have been priced below the low end of the initial pricing range have a significantly poorer level of performance in the after-market,” David Menlow, president of IPOfinancial.com in Millburn, New Jersey, said in a telephone interview after the sale was announced. “It is considered in many circles damaged goods.”

The offering is the 16th U.S. company IPO since the start of September, the most over a two-month period since 16 went public in January and February of 2008, data compiled by Bloomberg show. More than half of the stocks have fallen below their IPO prices.

Lehman’s Collapse

Initial share sales evaporated after New York-based Lehman Brothers Holdings Inc. filed the world’s largest bankruptcy last September, dragging the financial system to the brink of collapse.

The underwriters, including New York-based Merrill Lynch & Co. and Goldman Sachs Group Inc. and Frankfurt-based Deutsche Bank AG, have the option to offer 5.36 million additional shares. Dole initially said it planned to raise about $500 million when it announced the stock sale in August.

Dole intended to use the proceeds to repay $451 million in debt and a prepayment penalty of $17 million, the Oct. 9 filing said. The shares will trade under the ticker symbol DOLE.

The fruit producer also priced $300 million of convertible securities, according to terms obtained by Bloomberg News. The securities were priced at $12.50 a piece and carry a 7 percent coupon. The conversion price was set at $15. They were sold in a private placement to institutional investors.

Vegetables, Bananas

The company has a market value of $1.09 billion, smaller than rival Fresh Del Monte Produce Inc., which is worth about $1.5 billion, and 60 percent bigger than Chiquita Brands International Inc., which has a capitalization of $680 million.

There have been four IPOs announced by food companies this year — Dole, National Beef Inc. of Kansas City, Rochester, New York-based Birds Eye Foods Inc., and Greeley, Colorado-based JBS USA Holdings Inc. — the most since 2004, data compiled by Bloomberg show.

Dole is the first IPO by a food company since the July 2005 offering of Diamond Foods Inc., the Stockton, California-based marketer of almonds and other nuts. It’s also the largest in the industry since Northfield, Illinois-based Kraft Foods Inc. raised $8.7 billion on June 12, 2001.

Dole earned $20.9 million in income from continuing operations in the quarter ended in June, according to Dole’s prospectus. That implies a valuation of about 13 times earnings over a full year, based on the company’s market value.

Murdock’s Legacy

The valuation is higher than the 9.75 times estimated 2009 earnings for Fresh Del Monte, the George Town, Grand Cayman- based fruit and vegetable packer, and 7.12 times for Chiquita, the Cincinnati-based seller of bananas, Bloomberg data show.

“The market appears to be reflecting legitimate concern of valuation of the stock given their debt-repayment issue,” said Michael Cuggino, a San Francisco-based fund manager at Pacific Heights Asset Management, which manages $4.7 billion and doesn’t own Dole. “It’s a smart move for them, but given the market’s reaction, it appears the stock was mispriced.”

Murdock took Dole private in March 2003 after purchasing the 76 percent of shares he didn’t already own for $33.50 apiece. The transaction, which Murdock financed primarily with debt, valued the company at $1.9 billion.

His holding company also assumed $594 million in Dole’s net debt at the time of the deal, data compiled by Bloomberg show. Murdock contributed $125 million in cash toward the purchase.

Prior the IPO, Dole had about $1.58 billion in long-term debt as of June, according to a regulatory filing. Dole has generated negative cash flow, or cash flow from operations minus capital spending and dividends, every year since 2005, according to Fitch Ratings.

‘Very Overleveraged’

“Dole is very overleveraged,” said Francis Gaskins, president of IPODesktop.com in Marina del Rey, California. “It’s borrowed way too much money.”

The amount of money raised by IPOs since September prior to Dole accounted for almost two-thirds of this year’s $10.8 billion in sales, data compiled by Bloomberg show. Listings picked up after the Standard & Poor’s 500 Index climbed more than 50 percent from a 12-year low in March and the U.S. government lent, spent or guaranteed $11.6 trillion to shore up banks and combat the worst recession since the Great Depression.

The revival hasn’t coincided with bigger returns. Before September, the average U.S. company selling shares to the public this year gained 8.8 percent in the first month, beating the S&P 500 by 6.9 percentage points, data compiled by Bloomberg show.

Since then, eight of the 15 IPOs by U.S. companies have dropped, while 10 lagged behind the S&P 500.

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