Del Monte Foods Seeks Bidders; Staple Financing Under Fire

Target: Del Monte Foods Co.

Price: $4 billion

Sponsor: Kohlberg Kravis Roberts & Co., Vestar Capital

Seller: Public shareholders

Financial Adviser To Target: Perella Weinberg, Barclays Capital

Del Monte Foods Co. earlier this month hired Perella Weinberg to look for a buyer for the company who would be willing to pay more than its current $19 per share takeover pact from a group led by Kohlberg Kravis Roberts & Co.

Earlier, a Delaware judge had put a 20-day delay on the shareholder vote for Del Monte’s $4 billion takeover, according to sister news service Reuters. The judge also enjoined the food company and private equity buyers from enforcing the merger’s no-shop agreement. A no-shop agreement prevents Del Monte from soliciting other buyout offers.

In making its decision, Vice-Chancellor J. Travis Laster of Delaware Chancery Court cited two failures by the Del Monte board—letting its adviser, Barclays Capital, provide financing to the buyers, and letting KKR team up with Vestar Capital, which previously made the high bid in an earlier phase of the process. The decision could have implications for staple financing, which refers to the practice of sell-side advisors offering debt financing to potential buyers. Such financing has become common practice in the high end of the leveraged buyout market.

As a result of the judge’s decision, Del Monte decided to hire Perella Weinberg “to proactively contact third parties who may be potentially interested in acquiring the company,” the company said in a filing with the U.S. Securities and Exchange Commission.

“As always, our board’s objective is to maximize shareholder value. In that vein, the board has retained Perella Weinberg to proactively contact potentially interested parties and ensure that they are aware of the court’s decision and the additional opportunity it presents,” Del Monte said in a statement. “While we believe that $19 (per share) provides excellent value to shareholders, and that we held a robust go-shop process, we would obviously be receptive to a superior proposal should one emerge,” the company said.

KKR could not be immediately reached by Reuters for comment. In the wake of the judge’s ruling, Del Monte moved its shareholder vote by 20 days to March 7.

Jessica Hall is a Reuters correspondent in New York. This story combines two stories written by Hall, with editing by Bernard Orr, Gerald E. McCormick and David M. Toll