Del Monte to sell 13% stake in PH unit for $130M

Campos family-led food conglomerate Del Monte Pacific Ltd. (DMPL) is raising $130 million from the sale of a 13-percent stake in its Philippine business to Singapore-based fund manager SEA Diner Holdings Pte Ltd.

In a disclosure to the Singapore Exchange Ltd. on Friday, DMPL said going this route—share sale via a private placement—would enhance the value of Del Monte Philippines Inc. (DMPI) while generating funds to partially reduce debt stock. DMPL had shelved in 2018 DMPI’s initial public offering (IPO) due to adverse market conditions.

The new investor, SEA Diner, is focused on investing in leading companies in the consumer sector in China and the Southeast Asian region. This group has invested over $1 billion in Southeast Asian and Chinese consumer businesses to date, including technology companies.

The $130 million represents a price earnings multiple ratio of about 15.7 times DMPI’s earnings for the financial year ending April 2019.

“The funds that can be raised from the proposed sale will be used for the group’s capital restructuring plans moving forward, especially given that the company was unable to undertake the proposed public offering due to volatile market conditions that show no signs of improving,” the disclosure said.The completion of the proposed sale is still subject to a due diligence, among other mandatory approvals.

In line with the aim to improve the company’s balance sheet, the proposed sale would result in net gains made over the book value of the DMPI shares, the group said. Thus, the proposed sale is seen to

improve the group’s equity position and establish a benchmark for the pricing of the DMPI shares if and when the IPO plan takes off within a five-year period.

“DMPI shall use its best efforts to provide the investor an opportunity to sell all of the DMPI sale shares held by the investor on or before the date falling five years from the completion of the proposed sale. In the event that DMPI undertakes an IPO, the investor shall be given the first right (but not the obligation) to sell all of its shares in the IPO on terms no less favorable to the investor than those granted to the other existing shareholders,” the disclosure said.

Once the sale is completed, the new investor’s DMPI shares would be converted into redeemable convertible preferred shares. These shares would automatically be converted to ordinary shares in case of an IPO or private sale in order to give SEA Diner an exit mechanism.

DMPI produces and sells food and beverage products, which include fruit juices and juice drinks, packaged pineapples and mixed fruits, fresh pineapples and various tomato spaghetti sauces and culinary mixes under the Del Monte brand in the Philippines. It also exports these products for sale under other brands in other countries. INQ