Del Monte Pacific buys Del Monte Foods for $1.675B

Fruit grower and canner Del Monte Pacific Limited is cementing its position as an exporter, particularly to the US market, by acquiring the consumer food business of privately-held US firm Del Monte Foods for $1.675 billion.

 

On Friday, Del Monte Pacific told the Philippine Stock Exchange it entered into a definitive agreement to buy Del Monte Foods through a new subsidiary.

 

The company said the closing of the transaction – valued at $1.675 billion – is subject to regulatory approvals and customary closing conditions but not later than the first quarter of 2014.

 

The acquisition price will be financed through a combination of approximately $745 million of equity via the issuance of common and preferred shares in the market, and long-term debt of approximately $930 million.

 

The acquisition paves the way for Del Monte Pacific to expand in the US through the significant scale and reach of Del Monte Foods.

 

Del Monte Foods owns the Del Monte brand rights for processed food products – canned fruit, vegetable, tomato and broth segments – in the United States and South America, as well as the Contadina, S&W and College Inn brands.

 

"This landmark transaction offers (Del Monte Pacific) greater access to a well-established, attractive and profitable branded consumer food business in the world’s biggest market," chairman Rolando Gapud said in a statement. 

 

"The company expects to generate significant value creation opportunities in the US market through the expansion of current product offering to include beverage and culinary products...

 

“We also believe that consumer food business provides an attractive platform to offer certain products appealing to the large and fast growing Hispanic and Asian American population in the US," Gapud added.

The purchase deal

 

Under the terms of the purchase agreement, the Del Monte Pacific will buy the brands and certain assets, and assume certain liabilities related to Del Monte Food’s consumer food business in the US, as well as equity interests in certain South American subsidiaries.

 

The consumer food business will be managed under a separate platform and will be led by a US-based CEO and management team.

 

On June 10, Del Monte Pacific CFO Ignacio C.O. Sison said the company was going full blast fresh pineapple exports, expanding its core business of selling processed products under the Del Monte and S&W brands.

 

The company bought S&W for $10 million in 2007, allowing it to sell both processed and fresh pineapple products internationally, which was not possible solely under the Del Monte brand.

 

Del Monte Pacific, which is 67-owned by Campos family-led NutriAsia Pacific Ltd., operates one of the largest pineapple plantations in the world through subsidiary Del Monte Philippines.

 

The largely untapped South America business of Del Monte Foods also holds the potential to expand over time across new markets and product categories.

 

Perella Weinberg Partners LLC served as lead financial advisor and Citibank as financial advisor to the Del Monte Pacific, with Kramer Levin Naftalis & Frankel LLP was as legal advisor.

 

Citibank and Morgan Stanley are providing committed financing to Del Monte Pacific subsidiary which will acquire the brand rights, while  BDO Capital and Investment Corp. and Bank of the Philippine Islands are providing committed financing for Del Monte Pacific to fund the transaction. – Danessa Rivera/VS, GMA News