Mexican Group to Buy Del Monte Foods : Mergers: Billionaire Carlos Cabal Peniche is behind the $1-billion agreement. Deal continues trend by firms seeking to compete under NAFTA.
An investor group headed by Mexican billionaire Carlos Cabal Peniche has agreed to buy San Francisco-based Del Monte Foods Co. in a cash and debt transfer deal valued at close to $1 billion.
The transaction announced Monday is the latest in a series of U.S. acquisitions by Mexican firms seeking a better vantage point for competing under the North American Free Trade Agreement.
Since the agreement, which is designed to eliminate trade barriers between Mexico, the United States and Canada, took effect Jan. 1, Mexican firms have acquired an Arizona bus manufacturer, a Ft. Worth bakery, Westin Hotels and some cement plants in Texas and Arizona.
If completed, the Del Monte Foods deal would be the largest California acquisition yet by a Mexican firm. “Our goal is to build Del Monte into a major North American food business that will be a vigorous competitor in an increasingly unified North American market,” Cabal said in a statement.
Del Monte Foods is one of the world’s leading processors of fruits and vegetables, with operations in the United States, Mexico, Central America and the Philippines. The company had sales of $1.6 billion last year and has 13,500 employees.
Perhaps its best-known product is canned fruit cocktails, including Snack Cups.
The company is one of five now-unrelated Del Monte units that were spun off separately by parent RJR Nabisco after its infamous $25-billion leveraged buyout in 1989. In 1992, Grupo Cabal acquired one of those units, Del Monte Fresh Produce, a worldwide grower of bananas and pineapples, from a British firm that had acquired it from RJR Nabisco in 1989.
Del Monte Foods, which is controlled by a trust including Merrill Lynch & Co. and Citibank, put itself up for sale in January, 1990. An earlier deal with Grupo Cabal fell apart in April.
Under the definitive agreement announced Monday, shareholders of Del Monte Foods would receive approximately $277 million in cash, while Grupo Cabal would assume about $700 million in Del Monte Foods debt, a Cabal spokesman said. The new owners also plan to inject up to $40 million into Del Monte Foods’ operations after the deal’s closing, scheduled for September.
Cabal, 37, heads one of Mexico’s wealthiest families. His Grupo Cabal owns Banco Union, Mexico’s 10th-largest bank with about $7 billion in assets and 140 branches. He is in the process of acquiring Banco Cremi, whose $5 billion in assets will be merged into Banco Union to create Mexico’s fourth-largest bank. Neither bank has been particularly profitable, analysts said.
Cabal, originally from Merida on the Yucatan Peninsula but now based in Mexico City, also has widespread real estate, trading, marble and lumber businesses, said Susana Ornelas, a Baring Securities bank analyst in Mexico City.
Cabal has been touched by controversy in recent months. The investigation of the defunct and scandal-ridden Bank of Credit and Commerce International revealed that he had received a $60-million loan from a BCCI unit called Eastbrook that he repaid with $30 million in cash and stock in one of his companies after BCCI ran into financial trouble.
A spokesman said reports that Cabal was being investigated by the Manhattan district attorney’s office in New York for his BCCI involvement are false. But Cabal was named in a civil suit filed last year in New York state by now-defunct Eastbrook that alleges Cabal and two other Eastbrook employees fraudulently channeled the loan money into personal accounts. Cabal, through a spokesman, denied the charges.
