SINGAPORE (Reuters) - Singapore-listed Del Monte Pacific will buy the canned food business of private equity-backed Del Monte Foods Consumer Products for US$1.7 billion (S$2.1 billion), gaining a direct presence in the key US market and reuniting a substantial portion of the Del Monte brand family.
Shares in Del Monte Pacific surged 10 per cent on the deal.
It said the acquisition will give it the No. 1 branded position in major canned fruit and vegetable categories in the United States as well as the opportunity to offer its some of own products to the large and fast-growing Asian and Hispanic populations there.
The deal will also allow San Francisco-based Del Monte Foods to concentrate on its pet foods unit, including the recent acquisition of Natural Balance.
Del Monte Foods was acquired in 2011 by KKR & Co, Vestar Capital Partners and Centerview Capital in a deal valued at US$5.3 billion.
With the sale of its canned food business, the company plans to change its name.
Del Monte Pacific, a company that is strong in canned pineapple and tomato sauce, has been enjoying strong growth with net profit nearly trebling over the past three years to US$32.1 million in 2012.
The transaction will give it an additional net sales of more than US$1.8 billion.
"This landmark transaction offers (us) greater access to a well-established, attractive and profitable branded consumer food business in the world's biggest market," Del Monte Pacific's Chairman Rolando Gapud said in a statement.
Del Monte Pacific, which counts the Philippines as its largest market, is 67 per cent-owned by NutriAsia Pacific (NPL). NPL is owned by the NutriAsia group, which is majority-owned by the Campos family of the Philippines.
With Thursday's share surge, the company's stock is up 76 per cent so far this year, valuing the firm at $1.17 billion.
Del Monte Pacific said the deal will be largely funded through a combination of about US$745 million of equity in the company's new acquisition subsidiary, as well as long-term debt financing of about US$930 million that have been committed by a syndicate of bank lenders. It also plans to issue common and preferred shares in the market.