PHILADELPHIA/NEW YORK (Reuters) - Private equity firm Kohlberg Kravis Roberts & Co KKR.N is in advanced talks to buy Del Monte Foods Co DLM.N, two sources familiar with the situation said on Thursday.
KKR offered $18.50 a share for Del Monte, which makes canned vegetables and pet food, said one source. An offer of $18.50 a share would value the company at about $3.58 billion.
The two sides aim to complete an agreement by December 2 when Del Monte reports its quarterly earnings, the first source said. Del Monte is being advised by Barclays BARC.L, that source said.
A deal would be the latest in a flurry of private equity activity as financing markets have improved. Rival Carlyle Group CYL.UL recently struck a number of deals, including a $2.6 billion deal to buy Syniverse Technologies Inc SVR.N.
DealReporter, a financial news service affiliated with the Financial Times Group, earlier reported that Del Monte reinitiated a sale process and KKR has emerged from a pack of firms chasing it.
Del Monte spokeswoman Cassandra Bujarski said the company does not comment on market rumors or speculation. KKR declined comment.
The sources who spoke to Reuters declined to be identified because the talks were not public.
Other private equity firms in addition to KKR could also be interested in Del Monte, such as Apollo, a third source familiar with the situation said. Apollo has as an operating partner the investor C. Dean Metropoulos, a Connecticut entrepreneur known for reinvigorating food brands.
Metropoulos bought Pabst Blue Ribbon beer in June. He was also once the joint owner of brands such as Duncan Hines baking mixes, Vlasic pickles and Swanson frozen dinners.
Del Monte has a history of private equity ownership. TPG Capital TPG.UL purchased the company from a consortium of investors in 1997 for a reported $800 million, including debt. TPG later took Del Monte public, raising about $250 million, and gradually reduced its stake through the years.
PRICING PROMOTIONS WEIGH ON SALES
Del Monte, the maker of Meow Mix cat food, Del Monte canned fruit and Milk-Bone dog biscuits, is scheduled to report its fiscal second quarter earnings on Dec 2.
In September, the company cut its full-year sales forecast due to higher rebates paid to retailers to spur consumer spending. In July, Del Monte first cut its sales estimates for the year, citing a shift in marketing spending toward trade promotions.
Such promotions include amounts the company pays to retailers to lower the selling price of its products to increase their competitiveness.
The company currently trades at 10.43 times projected earnings, which is below the sector average of roughly 16.30 times projected earnings, according to Reuters data.
The stock has gained 30.5 percent this year, excluding Thursday’s gains. It closed Thursday at $15.71, up $1.21 after having touched a year-high of $16.41 following the report by DealReporter.
Reporting by Jessica Hall and Megan Davies; Additional reporting by Mihir Dalal and Nallur Sethuraman in Bangalore; Editing by Gary Hill
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