US food manufacturers HJ Heinz and Del Monte have agreed a US$1.8bn deal which will see Heinz spin off some of its underperforming businesses and merge them with Del Monte.
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The units involved are Heinz’ North American pet food and pet snacks, US tuna, US private label soup and infant feeding businesses. Brands to go include Kibbles ‘n Bits, 9-Lives, StarKist and Pup-Peroni.
Together, the businesses to be divested generate US$1.8bn in annual revenues, corresponding to a fifth of total revenues.
The spun-off businesses will be merged with Del Monte in an all-stock transaction. Heinz stockholders will receive 0.45 Del Monte shares for each Heinz share. This will leave 74.5% of shares in the new Del Monte in the hands of Heinz shareholders, with Del Monte shareholders holding 25.5%.
Heinz will unburden itself of US$1.1bn of debt in the process. The group has been under intense pressure for several years to pump up sales and profits. The move is “designed to make Heinz a simpler, more focused, more predictable and faster growing company,” said Bill Johnson, Heinz chief executive
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By GlobalDataThe market read the deal differently, however. Heinz shares were down US$2.05 at US$39.55 by yesterday’s [Thursday] close in New York, partly on news that Heinz would slash its dividend by a third to reflect the reduced size of the business and fund increased investment.
