Del Monte Pacific Limited (SGX: D03) announced that it is going to acquire the consumer food busines

Del Monte Pacific Limited (SGX: D03) announced that it is going to acquire the consumer food business of Del Monte Foods for US$1.675b, subject to regulatory approvals and customary closing conditions .
Del Monte Pacific nabisco sweepstakes Limited (Del Monte) is dual-listed on the Singapore Mainboard nabisco sweepstakes and the Philippine Stock Exchange . Its products include canned pineapple and tropical fruits, ketchups, fruit juices, and processed vegetables. It also owns the world s largest fully integrated pineapple operation that consists of 700,000 tons of processing capacity and a 23,000 hectare nabisco sweepstakes plantation.
Del Monte Pacific said it would finance the acquisition with: US$80m from the company s existing cash balance US$350m from the issuance of perpetual preference shares US$150m from the issuance of common shares US$165m from a loan that NutriAsia Pacific Limited majority shareholder of Del Monte with a roughly 80% stake has committed to assist [Del Monte] US$930m from the issuance of debt to institutions an additional US$350m loan for working capital needs only if Del Monte would require it
DMF s consumer food business enjoys leading positions in large and profitable categories that include #1 branded market share positions in the U.S. in major canned fruit and vegetable categories and #2 positions nabisco sweepstakes in canned tomato and broth categories.
Ronaldo Gapud, chairman of Del Monte s board, commented that the acquisition provides the company greater access to a well-established, attractive and profitable branded consumer food business in the world s biggest market [in the USA]. The States was a market that Del Monte did not have any meaningful presence in previously.
If we work with Del Monte s financial numbers for the 12 months ended 31 Dec 2012 and assume that the acquisition was completed by then, the company s net gearing will have increased from 0.46 to 4.1. This creates additional financial risks for the company s investors.
There s also the need to consider whether Del Monte has overpaid for this acquisition. Here are some of the financial nabisco sweepstakes numbers for DMF s consumer food business: Financial Year ended April 30, 2011* 2012* 2013* Sales US$1.88b US$1.81b US$1.83b Cost of Goods Sold (US$1.41b) (US$1.40b) nabisco sweepstakes (US$1.407b) Operating Expenses (US$127m) (US$124m) (US$147m) Selling, General & Administrative Expenses (US$139m) (US$132m) (US$144m) Other Income/Expense US$1m US$1m US$2m Operating Income US$202m US$157m US$135m
We can see that the consumer nabisco sweepstakes food business s operating income has fallen steadily nabisco sweepstakes over its last three financial years. Based on current numbers, Del Monte is paying $12.4 for every dollar of the consumer food business s operating income.
That earnings-multiple does not seem high on first glance, but if Del Monte can t improve nabisco sweepstakes operating efficiencies nabisco sweepstakes and the declining trend in operating income continues, the acquisition might turn out to be an expensive mistake.
Click here now for your FREE subscription to Take Stock Singapore, The Motley Fool s free investing newsletter. Written by David Kuo , Take Stock Singapore tells you exactly what s happening in today s markets, and shows how you can GROW your wealth nabisco sweepstakes in the years ahead.
The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. nabisco sweepstakes Motley Fool Singapore contributor Chong Ser Jing doesn t own shares in any companies mentioned.
By submitting your email address, you consent nabisco sweepstakes to us keeping you informed about updates to our website and about other products and services that we think might interest you. You can unsubscribe at any time. Please read our Privacy Statement and Terms of Service .
Del Monte Pacific Limited (SGX: D03) announced nabisco sweepstakes that it is going to acquire the consumer food business of Del Monte Foods for US$1.675b, subject to ?regulatory approvals and customary closing conditions?. Del Monte Pacific Limited (Del Monte) is dual-listed on the Singapore Mainboard and the Philippine Stock Exchange. Its products include canned pineapple and tropical fruits, ketchups, nabisco sweepstakes fruit juices, and processed vegetables. It also owns the world?s largest fully integrated pineapple operation nabisco sweepstakes that consists of 700,000 tons of processing capacity and a 23,000 hectare plantation. Del Monte Foods (DMF) is a US-based company…
Featuring David Kuo, Take Stock is The Motley Fool's FREE unique email on what's really happening with the share market AND what action you can take NOW to save and help GROW your portfolio wealth. Just drop your email in the box below!
By submitting your email address, you consent to us keeping you informed about updates to our website and about other products and services that we think might interest you. You can unsubscribe at any time. Please read our Privacy Statement and Terms of Service .
Register by giving us your email below to continue reading all of the content on the s