The Work

November 26, 2010 9:56 AM

Thanksgiving Deal: Gibson Dunn, Simpson Hash out Del Monte $5.3B LBO

Posted by Ed Shanahan

Update, 11/28/10, 10 a.m. - The name of the Simpson Thacher partner representing the buyers on the deal was added to the seventh paragraph below.

The Thanksgiving holiday wasn't a time to slow down for some dealmakers as Del Monte Foods announced plans to sell itself to an investor group led by Kohlberg Kravis Roberts & Co. for $5.3 billion, including the assumption of about $1.3 billion in debt.

According to a Del Monte statement released on Thursday, KKR, Vestar Capital Partners, and Centerview Partners will pay $19.00 per share of Del Monte in cash. The offer represents a 40 percent premium over Del Monte's average closing share price over the past three months to November 18, the statement said. The deal is the biggest leveraged buyout of 2010, according to The New York Times 

The Del Monte brand, which in the past has been largely associated with frozen and canned fruits and vegetables, today represents a growing piece of the $18.9 billion U.S. pet food market. The company produces several brand name pet products, including Meow Mix and 9Lives cat food, Milk-Bone dog biscuits, and Kibbles 'n Bits dog food.

In a statement, Del Monte chairman and CEO Richard Wolford said the deal will help to further grow the company that today has more than $3.7 billion in revenues. Pet foods account for 47 percent of Del Monte's total sales, according to Bloomberg, and its "pet products" sales more than doubled from 2005 through 2010. The growth in the pet food and pet product sectors points to an opportunity for the San Francisco-based company to grab more market share. Del Monte currently is fifth in the market behind Nestle SA, Mars Inc., Procter & Gamble, and Colgate-Palmolive, Bloomberg reported, citing data from Euromonitor International.

The Del Monte deal is the third in the sector so far this year. Nestle added to its portfolio of pet food products in September with the acquisition of Waggin' Train, a maker of dog snacks; in May, Procter & Gamble agreed to acquire Natura Pet Products Inc..

Gibson, Dunn & Crutcher represented Del Monte on the deal, according to the company's statement and the firm. The deal team was co-led by partners Dennis Friedman and Eduardo Gallardo, and included finance partners Linda Curtis and Aaron Adams, benefis partner Steve Fackler, and associates Melissa Toomey, Andrew Dick, Mike Dell, and Melissa Barshop. The firm has represented Del Monte in the past, according to our archives and Gibson Dunn's website.

The investor group was advised by Simpson Thacher & Bartlett, the statement says. The firm is a longtime outside advisor to KKR, whose general counsel, David Sorkin, is a former Simpson Thacher partner. Marni Lerner was the lead partner from SImpson advising the sponsors, according to a firm spokesperson.

Centerview Partners was advised by Paul, Weiss, Rifkind, Wharton & Garrison corporate partners Marilyn Sobel and Jeffrey Marell, according to the firm.

The deal allows for a go-shop period through January 8, during which time Del Monte can solicit higher offers from other parties. Provided no better offer is made, the deal announced on Thursday is expected to close by the end of March 2011, according to Del Monte's statement.

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