Del Monte Foods Company (NYSE:DLM) (“Del Monte”)
announced today that Del Monte Corporation, its wholly-owned subsidiary,
has completed the sale of its seafood business, including StarKist, to
Dongwon Industries Co., Ltd. ("Dongwon Industries") and its subsidiaries
(collectively, “Dongwon”)
for approximately $359 million, including an adjustment for the
preliminary estimate of working capital which will be updated once the
final working capital is determined. The sale was completed pursuant to
the previously announced Purchase Agreement among Del Monte Corporation,
Dongwon Enterprise Co., Ltd., Dongwon Industries, Dongwon F&B Co., Ltd.,
and certain direct and indirect subsidiaries of Dongwon Industries.
“The divestiture of StarKist improves Del Monte’s
margin structure, eliminates a source of earnings volatility and reduces
debt leverage,” stated Rick Wolford, Chairman
and CEO of Del Monte Foods. “This sale also
increases Del Monte’s focus on faster growing,
value-added, higher margin branded businesses, a key component of our
accelerated growth plan.”
“We are very pleased to have successfully
closed this transaction and to welcome the StarKist family to our
portfolio of products,” remarked Mr. Ingu
Park, Vice Chairman of Dongwon Enterprise. “Starkist,
a 65-year old brand and top household name, represents a great
opportunity for us to initiate operations in the United States. We will
continue to leverage the value this brings as we build upon its 37%
market share and number one position in the shelf stable tuna category
in the United States.”
The divestiture, announced June 29, 2008, included the sale of Del Monte’s
manufacturing capabilities in American Samoa and Manta, Ecuador; and
certain manufacturing assets associated with StarKist seafood located in
Terminal Island, California and Guayaquil, Ecuador. All of Del Monte’s
direct plant personnel related to the seafood business joined Dongwon as
a result of the divestiture. In addition, as a result of the
transaction, Del Monte transferred to Dongwon or eliminated a total of
33 salaried positions, consistent with expectations.
Del Monte has also entered into a two-year Operating Services Agreement
with Dongwon where Del Monte will provide various operational services,
such as warehousing, distribution, transportation, sales, IT and
administration to the transferred business. This agreement is expected
to offset the majority of fixed infrastructure costs retained by Del
Monte in fiscal 2010. The benefit from the Operating Services Agreement
coupled with the interest savings from planned debt reduction should
cause the transaction to be essentially neutral to Del Monte’s
EPS in fiscal 2010.
The transaction generates net after-tax cash proceeds of approximately
$300 million, which will be applied toward debt reduction in accordance
with the Company’s Credit Agreement dated as
of February 8, 2005, as amended through April 25, 2008.
