Del Monte Foods Agrees to $4 Billion Buyout

Del Monte Foods Co., the San Francisco-based maker of Kibbles 'n Bits, Meow Mix and other pet food brands, reported last week that it has agreed to be acquired by a group of investors.

Kohlberg Kravis Roberts & Co. L.P., Vestar Capital Partners and Centerview Partners have agreed to purchase Del Monte for $19 per share, or $5.3 billion, which includes the assumption of $1.3 billion in debt. This price represents a premium of approximately 40 percent over Del Monte's average closing share price during the past three months and is higher than any price the company's stock has ever achieved, Del Monte reported.
 
"This transaction delivers substantial shareholder value and is a clear endorsement of Del Monte's strategic success and executive execution," said Richard Wolford, Del Monte chairman and CEO. "The hard work and dedication of our talented team has helped to transform Del Monte from a $1 billion consumer foods business into a branded pet food and consumer products company with more than $3.7 billion in revenues."

Simon Brown, head of KKR's North American consumer practice, said the investor group looks forward to working with Del Monte employees and investing in the business as it continues to execute upon the company's growth strategy.

Del Monte plans to maintain a corporate presence in both the San Francisco Bay Area and Pittsburg, with its corporate headquarters remaining in San Francisco.

The agreement permits Del Monte to solicit alternative proposals from third parties through Jan. 8, 2011. The Del Monte Foods board of directors, with the assistance of its advisors, will actively solicit acquisition proposals during this period.

If there are no superior offers, the transaction is slated to close by the end of March 2011, subject to customary closing conditions. If completed, this would be largest leveraged buyout agreement since the collapse of Lehman Brothers Holdings in 2008 led banks to shun financing for most such transactions, according to Bloomberg news.

The Del Monte deal is the third pet food company acquisition to be announced this year. Nestlé acquired Waggin' Train dog treats in September and Procter & Gamble acquired Natura Pet Products in the spring.