Del Monte Pacific to Acquire Del Monte Foods’ Consumer Food Business

Singapore Mainboard and Philippine Stock Exchange dual-listed Del Monte Pacific Limited (DMPL) (Bloomberg: DELM SP, DMPL PM) (PSE: DMPL) has entered into a definitive agreement to acquire, through a new subsidiary, the consumer food business of U.S.-based Del Monte Foods (DMF) for $1.675 billion (subject to certain adjustments at closing). The closing of the transaction is subject to regulatory approvals and customary closing conditions.

DMF owns the Del Monte brand rights for processed food products in the United States and South America. DMF’s consumer business has a strong portfolio of leading brands, with seasoned employees, healthy cash flows and $1.8 billion of sales and $178 million of adjusted EBITDA in the fiscal year ended 28 April 2013. Adjusted EBITDA excludes one-time items that are not expected to recur.

The business is centered on the iconic Del Monte brand and further includes the Contadina, S&W and College Inn brands. The consumer business enjoys leading positions in large and profitable categories that include #1 branded market share positions in the U.S. in major canned fruit and vegetable categories and #2 positions in canned tomato and broth categories. This leading branded market position in the canned fruit and vegetable segments provides DMPL with significant scale and reach and, the company believes, an opportunity to unlock meaningful potential synergies.

Under the terms of the purchase agreement, the company will purchase the brands and certain assets, and assume certain liabilities related to DMF’s consumer food business in the U.S., as well as equity interests in certain South American subsidiaries from DMF.

“This landmark transaction offers DMPL greater access to a well-established, attractive and profitable branded consumer food business in the world’s biggest market. Prior to this acquisition, the U.S. was one of few key markets where our company did not have a direct presence nor have its own brands,” stated Rolando Gapud, Chairman of the Board of DMPL. “The Company expects to generate significant value creation opportunities in the U.S. market through the expansion of DMF’s current product offering to include beverage and culinary products. We also believe that DMF’s 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 U.S. We are very excited about this historic transaction which reunites a substantial portion of the Del Monte brand family.”

DMPL operates one of the largest pineapple plantations in the world and expects to benefit from much wider access to the processed pineapple business in the U.S., one of the largest packaged fruit segments in the American market. With greater access for its products, DMPL expects to realize synergies by leveraging its vertical integration, benefitting from economies of scale and value-added expansion, and optimizing operations over time.

In addition to these anticipated synergies with DMPL, DMF’s consumer foods business itself will build on its core business and leading market share in the U.S. across its canned fruit, vegetable, tomato and broth businesses. Its largely untapped South America business also has the potential to expand over time across new markets and product categories.

The acquired consumer food business will be managed under a separate platform and will be led by a U.S.-based CEO and management team. It is expected that the operating organization of DMF’s consumer food division will largely transfer to the Company together with the assets and operations of the business.

The transaction is valued at $1.675 billion and will be financed through a combination of approximately $745 million of equity in the company’s new acquisition subsidiary, as well as long-term debt financing of approximately $930 million that have been committed by a syndicate of bank lenders. As part of the equity financing, the Company plans to issue common and preferred shares in the market.

The transaction is subject to receipt of regulatory approvals and other customary closing conditions, and is expected to close not later than the first quarter of 2014. In accordance with Singapore Exchange rules, the Company will submit the transaction to its shareholders for approval, with majority shareholder NutriAsia Pacific Ltd having committed to vote to approve the transaction.

Perella Weinberg Partners LLC served as lead financial advisor, and Citibank as a financial advisor to the Company, in connection with the transaction. Citibank and Morgan Stanley are providing committed financing to DMPL’s acquisition subsidiary, while two leading Philippine banks, BDO Capital and Investment Corp. and Bank of the Philippine Islands, are providing committed financing to DMPL, to fund the transaction. Kramer Levin Naftalis & Frankel LLP is acting as legal advisor to the Company.

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