Del Monte Foods Co., a wholly-owned subsidiary of Del Monte Corp., announced yesterday that it has entered into an agreement to sell its seafood business, including StarKist, to South Korean Dongwon Enterprise Co. Ltd. for $363 million, subject to a working capital adjustment. The divestiture, which is subject to regulatory approval, is expected to be completed during the company's second quarter of fiscal year 2009.
Rick Wolford, Del Monte's chairman and CEO, explained that given the unique dynamics of the company's seafood business, including a heavy dependence on a single-input cost and participation in a comparatively lower growth category, StarKist was no longer an ideal fit. And, that divestiture of the business is a significant step in realignment its portfolio toward higher margin, higher growth businesses.
"This divestiture will immediately help improve our margin structure, eliminate a source of earnings volatility and reduce our debt leverage," said Wolford. "Importantly, this step is also consistent with our recently announced sharpened strategy targeted to accelerate growth by investing in faster growing, value-added, higher margin branded businesses, supported by our recent marketing-centric organizational realignment. Combined, these factors are expected to position Del Monte for improved earnings performance and sustained growth."
The divestiture includes the sale of Del Monte's manufacturing capabilities in American Samoa; Manta, Ecuador; and certain manufacturing assets associated with StarKist seafood located in Terminal Island, Calif., and Guayaquil, Ecuador.
Upon closing, all of Del Monte's direct plant employees related to the seafood business and approximately 34 other salaried positions are expected to join Dongwon. In addition, Del Monte will provide the company with operational services, such as warehousing, distribution, ransportation, sales, IT and administration, under a two-year operating services agreement.