Del Monte Pacific (DELM)  Ltd., the seller of fruit juices in the Philippines and India, said it agreed to buy the consumer food business of closely held  Del Monte  Foods Co. for $1.68 billion to expand in the U.S.

The transaction will give Del Monte Pacific the rights to brands including Del Monte and College Inn processed food product brands in the U.S. and South America, the company said in a statement to the Singapore stock exchange today. 

Taguig, Philippines-based Del Monte Pacific is looking to expand its business in the U.S., where  consumer spendingrose in August for a fourth consecutive month. While the two companies are separate entities, the Asian firm already owns the Del Monte brand in the  Philippines  and is a licensee in parts of the region.

Del Monte Foods, the U.S. company selling the business, is owned partly by KKR & Co.

The Singapore-listed company will finance the acquisition through a $930 million long-term loan and by issuing new stock in a newly created unit to run the U.S. business, according to the filing. The transaction is still subject to regulatory approvals and customary closing conditions.

To contact Bloomberg News staff for this story: Liza Lin in Shanghai atllin15@bloomberg.net 

 

 

 

Suntory Beverage & Food’s plan to spend more on takeovers than any Japanese soft-drinks rival over the past decade has made a target of Del Monte Pacific.

Following Asia’s biggest initial public offering of 2013, the maker of Boss coffee and Orangina soda has said it will spend as much as $5 billion on deals to help double sales by 2020. Del Monte Pacific, the US$893 million ($1.13 billion) seller of fruit juices in the Philippines and India, would meet Suntory’s need for fast-growing, emerging market assets, said Malayan Banking Bhd.

Del Monte Pacific “has a very attractive brand, so it does make sense,” James Koh, a Singapore-based analyst at Maybank, said in a phone interview. “These Japanese food and beverage companies have slow growth at home and very strong product expertise built up over many years.”

Suntory’s takeover budget surpasses spending by any Japanese acquirer of overseas non-alcoholic beverage companies since 2000, according to data compiled by Bloomberg. With the Tokyo-based company cutting reliance on its home market, Del Monte Pacific, based in Taguig City, Philippines, offers a distribution network across the country, Oversea-Chinese Banking Corp. said.

Del Monte Pacific today rose as much as 4.2%, and closed up 3% at 86.5 Scents, its highest in more than a month. The shares have gained 69% in 2013.

Suntory, the soft-drinks subsidiary of Suntory Holdings, started trading this month after raising almost $4 billion in Japan’s largest IPO in almost a year. The company, which also owns the rights to Schweppes in Europe, said it plans to double sales to 2 trillion yen ($25.3 billion) and intends to spend as much as 500 billion yen on acquisitions.

FAST DECISION
“The IPO is an announcement that ‘we’re ready to buy,’” said Mikihiko Yamato, deputy head of research at Tokyo-based JI Asia. “If they show they have the money from the equity markets, the potential sellers or the advisers will be coming.”

Nobuhiro Torii, Suntory’s chief executive officer and president, said in a July 9 interview he’s hunting in both mature and emerging markets.

In developing nations, distribution is key, said Torii, great-grandson of Shinjiro Torii, who founded Suntory in 1899. As early as September, Suntory’s mergers-and-acquisitions team will begin discussing more than 100 targets with the board, he said.

“They could already be talking to the adviser companies,” Yamato said in a phone interview. “It’s a family-led company, which means for M& A, they’ve got a faster decision-making process.”

PHILIPPINES’ GROWTH
Ribena and Lucozade, blackcurrant and energy drinks brands put up for sale by GlaxoSmithKline Plc in April and valued by analysts at $2.3 billion, might be among the targets, Yamato said.

“Lucozade and Ribena are a good fit,” Phil Carroll, an analyst at Shore Capital Stockbrokers Ltd. in Liverpool, England, said in an interview. “They’d be buying into established brands, so that takes part of the investment risk away.”

Profit at Suntory fell 21% last year to 23.4 billion yen, and more than two-thirds of its revenue came from Japan, according to data compiled by Bloomberg.

The Philippines, with Southeast Asia’s second-largest population after Indonesia, may be a focus for acquisitions, said Lim Siyi, a Singapore-based analyst at Oversea-Chinese Banking.



“Del Monte could provide them a good distribution network,” he said, referring to Suntory. “They’ll need local partners to penetrate these diverse markets.”  DEFINITE APPEAL
The Philippines is the largest market for Del Monte Pacific, which sell juices, canned pineapple and tomato ketchup. Net income at the company, which also sells food in Asia and the Middle East under the S& W brand, has almost tripled in three years to US$32.1 million.

“We are considering acquisitions, but the company hasn’t decided on targets yet,” said Kana Kamitani, a spokeswoman for Suntory. Jennifer Luy, Singapore-based investor relations manager at Del Monte Pacific, declined to comment, as did Glaxo spokesman Simon Steel.

Should Suntory use all of its US$5 billion allocation for takeovers, it will outspend any other Japanese acquirer of overseas non-alcoholic drinks companies, data compiled by Bloomberg show. Kirin Holdings Co. has spent about US$4.5 billion on foreign non-alcoholic acquisitions, including dairy companies, the data show.

HUGH CASHPILE
Closely held Suntory Holdings, which still controls Suntory Beverage, bought France’s Orangina Schweppes Group in 2009. While the value of that deal was never disclosed, people with knowledge of the matter said it was about 2.6 billion euros, or about US$3.9 billion at the time.

In October 2011, Suntory was in talks to buy bottled-water assets from Danone, owner of the Evian and Volvic brands, people familiar with the matter said at the time. No deal was ever reached.

A purchase of Del Monte Pacific would require Suntory to persuade the controlling shareholder, NutriAsia Pacific Ltd., to part with the company. A representative for NutriAsia said in an e-mail that any talk of a sale was speculation and declined to comment.

Suntory risks shareholder scrutiny if it fails to reach its acquisition goals, said Mariko Semetko, a credit analyst at Moody’s Corp. in Tokyo.



“They’re sitting on a huge pile of cash,” she said in a phone interview. “Developed markets are saturated and if you want growth, it is natural to seek growth overseas. From a diversification standpoint, it makes sense.”

 

 

 

 

 

DBS Vickers is standing by its buy call on Del Monte Pacific with a target price of 97 cents. “We maintain our Buy recommendation with a DCF-backed TP of $0.97, implying FY14F PE of 22.5x. This is projected to decline to 16.3x by FY15F. We view DMPL as inexpensive, trading at c.17.6x PE on FY14F, compared to regional F& B peers’ trading at an average PE of 24x.”

DBS Vickers’ analyst Andy Sim says he sees Del Monte Pacific as a key branded consumer play with 60% revenue from Philippines with clear growth drivers in place, supported by its established brands.

Sim says growth drivers in the near term will be from the Philippines market, expansion of S& W brands for processed and fresh fruits in Asia and Middle East, and management’s strategy to shift production of pineapple juice concentrates to ready-to-drink canned beverages. By FY15F, the changes in long term supply contracts and expiry of its PET toll packing contracts are further expected to lift earnings to US$62 million, representing CAGR (FY12–15F) of 25%.



There were queries on the group’s net gearing which rose to a high of 62% as of 1Q13 given that interest rates could potentially rise. However, gearing is expected to taper down to about0.4-0.5x. Management shared that 90% of its loans are short term in nature and are aware of risks from a rise in interest rates. They would be looking to manage their loan maturities going forward. On DBS Vickers’ estimates, it estimates that a 1ppt rise in interest rates could impact FY14F/15F earnings by –2.2%/–1.6%. 

...Last Done: $0.805... 

Mainboard-listed Del Monte Pacific Limited said it has submitted on Thursday an application for a secondary listing on the Philippine Stock Exchange (PSE).

The company said there would be no immediate issue of new shares but may be offering vendor shares, subject to market conditions.

It believes the dual listing would help widen its investor base to include those in the Philippines and those interested in the stock market there.

It also hoped it will see greater trading liquidity and attract more research coverage on the company. 

 

http://www.businesstimes.com.sg/breaking-news/singapore/del-monte-seeks-secondary-listing-philippines-may-offer-vendor-shares-201304