NEW YORK/PHILADELPHIA (Reuters) - Del Monte Foods Co DLM.N agreed on Thursday to be bought by a group led by Kohlberg Kravis Roberts & Co KKR.N in a deal worth about $4 billion excluding debt, the latest in a flurry of private equity transactions.
The $19 per share offer for the company, which makes Meow Mix cat food, Milk-Bone dog biscuits and canned vegetables, represents a 5.6 percent premium over Del Monte’s closing stock price of $17.99 on Wednesday, and a premium of about 23 percent over its opening price on November 18, when media reports about a possible deal began circulating. Del Monte’s stock has surged 62 percent this year.
Vestar Capital Partners and a fund run by Centerview partner James Kilts will join KKR in the deal, which ranks as one of the largest U.S. leveraged buyouts of the year. The three partners will assume about $1.3 billion in Del Monte’s debt. When including the debt, the company said the deal value is $5.3 billion.
Del Monte can try to solicit high offers until January 8, 2011 during a so-called “go shop” period. Del Monte said it expects the deal to close in March if it gets no higher bid. It also said it plans to keep its headquarters in San Francisco.
In September, Del Monte 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.
San Francisco-based 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.
Centerview recently bought pizza maker Richelieu Foods Inc from Brynwood Partners. Vestar has invested in consumer-focused companies including Birds Eye Foods and Sun Products.
The Del Monte deal is the latest high-profile private equity deal. Earlier this week, private equity firms TPG Group and Leonard Green & Partners LP struck a deal to buy J Crew Group Inc JCG.N for $2.86 billion.
TPG has also been pursuing hard-disk drive manufacturer Seagate Technology STX.O, which has a market capitalization
of $6.53 billion, sources previously told Reuters. Rival Carlyle Group CYL.UL also recently struck a number of deals, including a $2.6 billion deal to buy Syniverse Technologies Inc.
Private equity firms are under pressure to invest billions of dollars raised over the past few years, with some funds facing deadlines on their investment periods, and firms have become increasingly active in buying assets over the past few months.
Barclays Capital Inc served as financial advisor to Del Monte Foods. Centerview Partners acted as lead financial advisor to KKR and its partners in the deal. KKR, Centerview and Vestar secured debt financing from Bank of America Merrill Lynch, Barclays Capital, JPMorgan Chase, Morgan Stanley and KKR Capital Markets LLC.
Reporting by Megan Davies in New York and Jessica Hall in Philadelphia; additional reporting by Phil Wahba. Editing by Andrew Hay
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