11:06 AM
Del Monte to be bought by KKR-led group: source
Addison Ray
By Megan Davies and Jessica Hall
NEW YORK/PHILADELPHIA | Thu Nov 25, 2010 1:43pm EST
NEW YORK/PHILADELPHIA (Reuters) - Del Monte Foods Co (DLM.N) is to be bought for about $19 a share, or more than $5 billion including debt, by a group led by Kohlberg Kravis Roberts & Co (KKR.N), a source familiar with the situation said.
An announcement is expected later on Thursday, said the source, who declined to be identified by name because the talks were not public. A deal to acquire Del Monte, maker of Meow Mix cat food, Milk-Bone dog biscuits and canned vegetables, would be the latest in a flurry of private equity activity.
A $19 per share offer would mark a 5.6 percent premium over Del Monte's closing stock price of $17.99 on Wednesday. Del Monte's stock has surged 62 percent this year, with sharp gains over the past week due to takeover reports.
Vestar Capital Partners and a fund run by Centerview partner James Kilts will join KKR in the deal, which would rank as one of the largest U.S. leveraged buyouts of the year.
Del Monte could not be immediately reached for comment. KKR and Centerview could not be immediately reached for comment. Vestar declined to comment.
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.
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.
A Del Monte deal would be 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.
(Reporting by Megan Davies in New York and Jessica Hall in Philadelphia; Editing by Andrew Hay)
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