Campos group completes $1.67B buyout of Del Monte’s US business

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10:40 AM February 19th, 2014

By: Doris C. Dumlao, February 19th, 2014 10:40 AM

MANILA, Philippines–Campos family-led Del Monte Pacific Ltd. (DMPL) has completed the $1.675-billion buyout of the consumer food business of private-held American corporation Del Monte Foods, gaining a foothold into the world’s biggest market.

Following this transaction, which consolidating DMPL’s portfolio with the century-old US mother brand, the US consumer food business will be renamed Del Monte Foods Inc. (DMFI), DMPL said in a disclosure posted on the Philippine Stock Exchange on Wednesday.

“Del Monte Foods, with a 26 percent 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 DMPL chair Rolando Gapud. “It will also provide longer term opportunities in the emerging markets of South America.”

“We are very excited about this historic transaction which quadruples DMPL’s sales from $500 million to more than $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,” Gapud said.

The acquisition was partly funded by bridge loans. The final financing structure provided for a total equity investment of $705 million into DMFI of which $605 million was in the form of fresh capital and the balance from loans.

“Over the last two years, significant investments have been made into the 100-year old iconic Del Monte brand,” said DMFI chief executive officer Nils Lommerin. “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.”

Lommerin, who has been with the company in the United States for more than 10 years, sees 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 is seen bringing 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 10 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 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,” Lommerin said.

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 Corp. – for Asia, Middle East, Europe and Africa.

This acquisition adds significant scale and reach into new market segments for the DMPL, a longtime supplier of processed pineapple to the U.S. 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 DMFI portfolio generated $1.8 billion in sales and $164 million in cash flow.

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