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UPDATE 3-Thai tuna firm TUF hooks big one with MW Brands buy

* Buying John West owner MW Brands for $884 mln

* Says to become the world’s biggest seafood firm

* Sales from European units will now make up third of total

* Funding for the acquisition comes from euro and baht loans

* TUF shares fall as much as 5 pct in flat market

(adds banks, losing bidders, detail on food M&A, Trilantic)

By Arada Kultawanich

BANGKOK, July 28 (Reuters) - Thai Union Frozen Products PCL (TUF) TUF.BK, the owner of the "Chicken of the Sea" canned tuna brand, said on Wednesday it would buy MW Brands Holdings SAS for $884 million to become the world's biggest seafood firm.

TUF is already the world’s largest canned tuna maker, while France-based MW has brands such as canned fish producer John West and canned tuna producer Petit Navire.

“MWB’s strong European footprint will provide us with further business opportunities in the future through a strong customer base, distribution and brand leadership,” TUF President Thiraphong Chansiri said.

MW was formerly part of HJ Heinz Co HNZ.N and is being sold by Trilantic Capital Partners, the former private-equity arm of Lehman Brothers, which bought MW in 2006.

TUF beat other potential buyers including private equity firm Blackstone BX.N and privately held strategic rival Bolton Alimentari, people familiar with the matter said.

TUF’s investment, Thailand’s second-largest overseas deal, will boost its tuna processing capacity to 500,000 tonnes per year.

Shares in TUF dropped nearly 5 percent at one stage to 45.50 baht due to worries about its debt-to-equity ratio rising to fund the deal.

“With the deal being done through borrowing, this should bump up its (debt to equity) to 2.2-2.3 times in the short term,” said Finansia Syrus Securities analyst Jitra Amornthum.

However, Jitra added: “We see positive factors coming in from marketing. The move should help strengthen TUF’s horizontal expansion by diversifying its customer base into Europe.”

At the midsession break, TUF shares were down 3.1 percent at 46.25 baht, while the main Thai index .SETI was flat.

LOANS

The 680 million euro deal follows the $2 billion purchase this month of Australia's Centennial Coal CEY.AX by Banpu BANP.BK, Thailand's biggest ever overseas acquisition.

It also marks the latest spot of dealmaking in the food industry, following frozen-food deals in Italy and France worth more than $1 billion each, and news that Blackstone is considering a $3 billion-plus sale of Britain’s United Biscuits. [ID:nLDE66P0T1] [ID:nLDE66I0KH [ID:nLDE66K18C]

The deal will add four processing plants in France, Portugal, the Seychelles and Ghana to TUF’s five processing facilities in Thailand, Indonesia, Vietnam and the United States. Its fishing fleet will more than double to nine vessels from four.

The deal would increase Europe’s contribution to TUF’s sales to more than a third from 11 percent, the company said.

MW brands, which has operations in several European countries including Britain and Italy, had sales of 448 million euros ($582 million) and total assets of 559 million euros in its business year that ended in March.

TUF posted sales of 68.9 billion baht ($2.14 billion) with a net profit of 3.3 billion baht in 2009. Tuna products accounted for 44 percent of its sales.

The Chicken of the Sea name has been around since the 1900s. Albacore tuna used to be known as chicken of the sea because its pale colour and mild flavour reminded fishermen of chicken.

Morgan Stanley and Bualuang Securities advised TUF, while UBS advised Trilantic.

Financing for the acquisition has been fully secured, TUF said, with 340 million in euros in loans from international banks and a further 15 billion baht from Thai banks.

TUF also said it would issue convertible bonds worth up to 60 million euros for a private placement plus 116.83 million new shares for conversion.

The convertible bonds would have a maturity of four years with a coupon of 5 percent and an overall yield of 8 percent if not converted into common shares, it said, adding the conversion price was 46 baht a share.

($1=32.20 Baht=.7694 Euro)

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