Del Monte Pacific acquires Del Monte Corp.’s consumer food business for $1.675B

SINGAPORE/MANILA -- Singapore Mainboard and Philippine Stock Exchange dual listed Del Monte Pacific Limited (Bloomberg: DELM SP, DMPL PM) announced today that it has completed its purchase of the consumer food business from Del Monte Corporation for US$1.675 billion subject to working capital adjustments. The U.S. consumer food business will be renamed Del Monte Foods, Inc. (“DMFI”).

The acquisition offers DMPL greater access to a well-established and profitable branded consumer food business in the world’s biggest market.

“Del Monte Foods, with a twenty six per cent market share in the canned fruit market in the United States will provide Del Monte Pacific with a solid growth platform and supplement our achievements in the expanding markets of Asia,” said Mr. Rolando Gapud, Chairman of DMPL.

 â€œIt will also provide longer term opportunities in the emerging markets of South America,” he added.

“Del Monte Foods is led by an excellent management team with whom we have worked very closely over many years,” said Mr. Gapud. “They bring to us a proven track record in managing one of the most respected consumer brands in the United States.”

The acquisition was financed partly by bridging loans for the closing. The final financing structure provides for a total equity investment of US$705 million into DMFI of which US$605 million are in the form of fresh capital and the balance from loans.

DMPL owns the Del Monte brand in the Philippines where it is the market leader across major food and beverage categories. The brand also has a growing presence in India through FieldFresh Foods, DMPL’s joint venture with Bharti Enterprises, one of India’s largest conglomerates.

In 2007, DMPL purchased the S&W brand – a producer and marketer of premium quality packaged fruits and vegetables – from Del Monte Corporation – for Asia, Middle East, Europe and Africa.

The Del Monte Foods acquisition adds significant scale and reach into new market segments for the Company, a longtime supplier of processed pineapple to the US market, through a strong portfolio of leading packaged consumer food brands.

DMFI’s portfolio of brands – Del Monte, S&W, Contadina and College Inn – includes No. 1 position in the branded canned fruits and vegetables market and No. 2 position in the canned tomato and broth categories in the United States.

In fiscal year 2013, the portfolio generated US$1.8 billion in sales and US$164 million in EBITDA while DMPL recorded sales of US$460 million and an EBITDA of US$60 million in 2012. DMPL will be releasing its full year 2013 results on 25 February 2014.

“Over the last two years, significant investments have been made into the 100-year old iconic Del Monte brand,” said Nils Lommerin, Chief Executive Officer of DMFI.

“This deal allows for complete focus on the strategic direction of the Del Monte brand, backed by a visionary and strategic parent in Del Monte Pacific, and positions us to capture significant growth opportunities as Del Monte Foods moves forward,” he added. Mr. Lommerin has been with the company in the United States for more than ten years.

He anticipates that there are considerable opportunities to improve the profitability of DMFI through both sales expansion and cost reduction.

DMPL operates one of the largest pineapple plantations in the world and brings to DMFI potential benefits from economies of scale, value-added expansion as well as the optimization of its operations over time.

“At present, our market share of the canned pineapple market in the United States is less than ten percent and we will focus on increasing our penetration in this segment by leveraging on the advantages of vertical integration and DMPL’s success in the Philippines and elsewhere,” said Mr. Lommerin.

DMFI’s largely untapped South America business also has the potential to expand in the longer term across new markets and product categories. “At the appropriate time, we will position ourselves to take advantage of the rise of domestic consumption in some of the key South American countries,” commented Mr. Lommerin.

“We are very excited about this historic transaction which quadruples DMPL’s sales from US$500 million to more than US$2 billion, and fortifies DMPL’s vision of becoming a global branded food and beverage company. This is a game-changer for the Company and we will provide full support to DMFI to ensure we execute against our plans for future growth,” concluded Mr. Gapud.