British Conglomerate to Buy Part of Del Monte From RJR
RJR Nabisco Inc. said Thursday that it would sell the fresh fruit operations of Del Monte to the British conglomerate Polly Peck International PLC for $875 million in another major step toward reducing debt from its record buyout.
The cash sale of Del Monte Tropical Fruit Co. moves RJR past the halfway mark in its efforts to sell about $5.5 billion in assets to reduce the debt accumulated in the $25-billion buyout of the food and tobacco giant by Kohlberg Kravis Roberts & Co.
Del Monte is the world’s largest supplier of fresh pineapples and No. 3 in bananas. Its acquisition would make Polly Peck a major player in the fresh fruit industry by allowing it to use the well-known Del Monte brand name on its entire range of produce.
RJR’s plan to divest assets, particularly among its food holdings, began in June, when it sold five European food businesses for $2.5 billion to BSN SA of France, and its Chun King unit for $52 million to a Singapore syndicate. The following month it sold its biscuit and food businesses in India and Pakistan for $44 million.
“We are significantly ahead of schedule in completing that plan,” said RJR Chairman Louis V. Gerstner.
‘A Good Price’
RJR said the amount received for the fresh fruit business was about 13 times the unit’s projected 1989 operating income, a price tag generally in line with analysts’ expectations.
“I’d say it’s a good price. Of course, it’s not as good as what they extracted from the (European) snack food operations,” said Marc I. Cohen, of the New York securities firm Sanford C. Bernstein.
John Maxwell, an analyst with Wheat First Securities in Richmond, Va., said he expected RJR to proceed with plans to sell the rest of Del Monte as well, including Del Monte Foods USA and separate units in Europe, Latin America, Canada and the Far East.
Del Monte Tropical Fruit, with $600 million in sales of pineapples, bananas, papayas, mangoes and other fresh fruits last year, accounted for about a quarter of Del Monte’s total sales.
RJR had total revenue of $7.44 billion for the first six months of 1989.
Polly Peck said it planned to finance the acquisition through a rights issue and from bank loans. It said it hopes to complete the deal by Oct. 26.
The rights issue will allow existing shareholders to buy new Polly Peck shares at $3.77, or 245 pence, about 20% below their recent trading range.
The London-based company also has operations in electronics, textiles and hotels. Its sales totaled $804 million for the first six months of this year.