Del Monte Pacific sells 12% stake in Philippine unit for US$120m

FOOD and beverage company Del Monte Pacific on Thursday said it has sold a 12 per cent stake in its indirect wholly-owned subsidiary Del Monte Philippines, Inc (DMPI) for US$120 million. 

This is a slightly smaller stake than the 13 per cent Del Monte had initially proposed to sell for US$130 million. 

On April 30, Del Monte entered into a supplemental agreement to sell about 335.7 million shares in DMPI to Singapore-incorporated firm, SEA Diner Holdings, which the group termed as its "investor", instead of the 363.7 million shares initially proposed. 

Net cash proceeds from the sale is about S$149.4 million, which the company will use to pay down certain outstanding loans.

As at Jan 31, the book value of the DMPI sale shares is S$34.9 million, resulting in a net gain on disposal of S$114.5 million. Net profit attributable to the sale shares amounts to S$11.1 million, Del Monte noted. 

In addition, under the original agreement, the DMPI sale shares will be converted into redeemable convertible preferred shares (RCPS) in DMPI upon completion of the deal. The RCPS shall be automatically converted into ordinary shares of DMPI upon the occurrence of either an initial public offering (IPO), or a trade or private sale of DMPI sale shares.

However, if there is no IPO or trade sale after five years from the closing of the sale, the RCPS shall be redeemed at the redemption price, which is an amount paid on the RCPS, plus an 8 per cent rate of return (compounded on a per annum basis), calculated from the close of the sale up to the redemption date.

The investor, as an RCPS holder is entitled to dividends on an as-converted basis, and such dividends were to be credited for the purpose of calculating the redemption amount.

However, under the supplemental agreement, the parties have agreed that any dividends received by the investor from DMPI (other than the dividends in respect of the financial year ended April 30), would no longer be credited for the purpose of calculating that redemption amount. 

Shares in Del Monte closed at 10.8 Singapore cents on Wednesday, up 0.7 cent or 6.9 per cent.