American food company Del Monte offloads seafood business for $363 million

01 July 2008

San Francisco-based Del Monte Foods Co. will divest its StarKist Seafood unit to Korean conglomerate Dongwon Enterprise Co. for $363 million in order to concentrate on higher margin produce and pet foods.

Del Monte Foods Co., which operates brands such as Contadina, Kibbles 'n Bits and 9Lives, said the divestiture would improve margins, eliminate a source of earnings volatility and reduce debt. (See: Del Monte says might offload StarKist) 

In fiscal 2008, the seafood business generated about $560 million in sales. It is the top selling tuna brand in the US, with a 35-per cent market share. Del Monte said the sale price represents a multiple of approximately 6-7 times the average trailing three-year contributed EBITDA of the seafood business.

"Given the unique dynamics of our seafood business, including its heavy dependence on a single input cost and participation in a comparatively lower growth category, StarKist was no longer an ideal fit for Del Monte, given our sharpened strategic focus going forward," said Rick Wolford, chairman and CEO.

The sale includes Del Monte's manufacturing businesses in American Samoa, Ecuador and some seafood factory assets in Terminal Island, California. Del Monte expects to wrap up the deal by the second quarter of its fiscal year 2009, subject to regulatory approvals.

All of Del Monte's direct plant employees related to the seafood business and about 34 other salaried positions are expected to join Dongwon. Del Monte also agreed to provide operational services, such as warehousing, distribution, transportation, sales, IT, and administration, for Dongwon for two years.