SAN FRANCISCO (AP) -- Del Monte will sell its seafood business, which includes the StarKist brand, to a South Korean company for $363 million as it focuses on higher margin produce and pet foods.
Del Monte Foods Co., which operates brands such as Contadina, Kibbles 'n Bits and 9Lives, said the divestiture will improve margins, eliminate a source of earnings volatility and reduce debt. In fiscal 2008, the seafood business generated about $560 million in sales.
"Given the unique dynamics of our seafood business, including its heavy dependence on a single input cost and participation in a comparatively lower growth category, StarKist was no longer an ideal fit for Del Monte, given our sharpened strategic focus going forward," said Rick Wolford, chairman and chief executive.
The sale to South Korea's Dongwon Enterprise Co., announced late Sunday, includes Del Monte's manufacturing operations in American Samoa; Manta, Ecuador; and certain StarKist manufacturing assets in Terminal Island, California and Guayaquil, Ecuador. All of Del Monte's direct plant employees related to the seafood business and about 34 other salaried positions are expected to join Dongwon.
Del Monte also agreed to provide operational services, such as warehousing, distribution, transportation, sales, IT, and administration, for Dongwon for two years.
Dongwon F&B processes the fish and Dongwon Industries catches tuna. Starkist processes tuna but does not fish for it.
"We believe that the acquisition of StarKist seafood will help Dongwon establish a strong foothold and penetration in the U.S. market as we look to drive Dongwon's initiatives for globalization," said Ingu Park, vice chairman of Dongwon.
The deal is expected to close during Del Monte's fiscal 2009 second quarter, subject to regulatory approval. Merrill Lynch & Co. is acting as financial adviser to the company on the StarKist sale.
Looking ahead, Del Monte forecast fiscal 2008 profit from continuing operations (which excludes StarKist) of $108 million, or 54 cents per share, on revenue of $3.18 billion.
The company said it will provide further details, including updated fiscal 2009 sales and margin guidance, at its investor day July 8.