Del Monte Pacific buys US canned food business for S$2.1 billion
SINGAPORE — Del Monte Pacific (DMPL), the Singapore-listed firm known for its pineapple, tomato and fruit juices, has agreed to buy the consumer food business of American foodmaker Del Monte Foods for US$1.7 billion (S$2.1 billion) to expand in the world’s biggest economy.
The deal between the two unaffiliated companies will give the Philippines-based DMPL canned fruit, vegetable and broth brands as part of a business that counts Wal-Mart Stores among its customers.
The lines generate annual sales of about US$1.8 billion, it said in a statement. DMPL already has licences for some of the brands in parts of Asia.
“The US was one of few key markets where our company did not have a direct presence nor have its own brands,” DMPL Chairman Rolando Gapud said.
“This landmark transaction offers DMPL greater access to a well-established, attractive and profitable branded consumer food business in the world’s biggest market,” he said.
DMPL said the deal will be largely funded through a combination of about US$745 million of equity in its new acquisition subsidiary, as well as long-term debt financing of about US$930 million that have been committed by a syndicate of bank lenders. The company also plans to issue common and preferred shares in the market.
DMPL is paying 0.93 times revenue, higher than the 0.85 average of 14 deals involving canned food companies over the last decade globally, according to Bloomberg data.
The company may be overpaying and be better off investing the amount in emerging markets, where its strengths currently are, said OCBC Investment Research analyst Lim Siyi.
“The US economy is improving, but the space is quite crowded and you should stay with your competitive strengths,” Ms Lim said.
Shares in DMPL surged 11 per cent to close at S$0.905 yesterday.