TWO private equity funds are believed to have joined Kohlberg Kravis Roberts (KKR) in the buyout firm’s bid for Del Monte Foods, sources familiar with the situation said yesterday.
Vestar Capital Partners and a fund run by Centerview partner James Kilts are both understood to be working with KKR, with the suggestion that an agreement could be announced within days.
KKR is believed to have been in advanced talks to buy Del Monte for several weeks. News of the potential take over earlier this week prompted ratings agency Standard & Poor’s to put Del Monte Foods on watch for a possible downgrade, suggesting any takeover could add meaningful debt that would weaken Del Monte’s credit protection measures below current levels.
KKR had offered $18.50 a share for Del Monte, which would value the company at about $3.58bn (£2.3bn).
Centerview recently bought pizza maker Richelieu Foods from Brynwood Partners. Vestar has invested in consumer-focused companies including Birds Eye Foods and Sun Products.
KKR, Centerview, Vestar and Del Monte declined to comment.
Del Monte has cut its sales outlook twice this year, citing higher rebates paid to retailers to spur consumer spending.
The company currently trades at 12 times projected earnings, which is below the sector average of roughly 16.4 times projected earnings.
Del Monte’s stock has leapt 62 per cent this year, with sharp gains over the past week driven by the takeover speculation.
The shares closed up 5.5 per cent at $17.99 yesterday.