Tags: Del Monte | Takeover | Talks | KKR

Del Monte Rises on Report of Takeover Talks With KKR

Friday, 19 Nov 2010 10:00 AM

Del Monte Foods Co. climbed as much as 13 percent in New York trading after the Financial Times said the maker of canned fruit and Meow Mix cat food is in advanced discussions to be taken over by KKR & Co.

The parties are talking about a price of around $18.50 a share, the newspaper reported, citing unidentified people familiar with the matter. That would be 18 percent higher than the San Francisco-based company’s close of $15.71 yesterday on the New York Stock Exchange.

A buyout of Del Monte by KKR would be at least the second private-equity food deal this month. On Nov. 5, Lion Capital LLC of London said it would acquire canned seafood maker Bumble Bee Foods LLC from New York buyout firm Centre Partners Management LLC for $980 million.

Del Monte climbed $1.98 to $17.69 at 9:33 a.m. New York time. Earlier the shares surged as high as $17.72. Del Monte had risen 39 percent this year before today, equal to a market value of about $3 billion.

The stock has surged alongside sales in the pet-food business. Revenue at the division represented about half of Del Monte’s $3.74 billion in sales last year, up from 29 percent four years ago. Del Monte bolstered its pet-food business with the 2006 acquisitions of Meow Mix and Milk-Bone.

The pet food industry has been consolidating, with Nestle SA, the world’s largest food company, buying dog snack maker Waggin’ Train LLC from private equity firm VMG Partners in September. In May, Procter & Gamble Co., whose pet-food brands include Iams and Eukanuba, agreed to acquire closely held Natura Pet Products Inc. for an undisclosed sum.

Buyout Strategy

A spokeswoman for Del Monte’s outside public relations firm, Sard Verbinnen & Co., didn’t immediately respond to a request for comment outside of regular business hours. Kristi Huller, a representative for New York-based KKR, declined to comment.

Buyout firms use a combination of their own funds and debt to pay for takeovers and then seek to improve profit by boosting sales, selling assets and cutting costs. The firms typically sell the companies within five years.

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