Pet Food News
On October 28, 2013

P&G may look to Del Monte to purchase Iams petfood division

Deal would reportedly make Del Monte second-largest producer in North America

Procter & Gamble Co. (P&G) may have found a buyer for its Iams petfood brand in Del Monte Foods, Bloomberg reported.

Shareholder HighMark Capital Management Inc. said P&G, which is under pressure to revive itself, could improve sales and boost its share price by selling assets including the Iams petfood division. P&G shares are being discounted because the company is too diversified and too large, and selling assets like the pet-care business may be a "prudent move," Todd Lowenstein, a fund manager at HighMark Capital, said.

According to Exane BNP Paribas, Del Monte, a private-equity-owned company, is seeking to expand its pet products business after agreeing in October to sell its canned peaches and corn division for US$1.68 billion.

Selling the Iams division could result in as much as US$2.5 billion for P&G, said Sanford C. Bernstein & Co., while buying Iams would position Del Monte, with a 20 percent market share, ahead of Mars Inc. as the second largest to Nestle in the petfood and treats industry in North America. In August, P&G reported that its market share fell below 10 percent.

If P&G sold Iams, "the market would reward management with a higher multiple, a higher valuation because they are getting focused," said Lowenstein, whose firm oversees about US$19 billion including P&G shares. Iams is "non-core to their future strategic initiatives. They could probably exact a pretty decent price from someone who has a lot of synergy value in combining those businesses."

Erin Lash, an analyst with Morningstar, said P&G rivals like Nestle and Unilever are considering or already selling off parts of their holdings.

"Everybody's doing this: selling off non-core businesses to reinvest in areas with the highest growth, highest profit potential," Lash said.

Ali Dibadj, a New York, USA-based analyst at Bernstein, said the Iams division could be worth about US$2.5 billion in a sale, while Ferry of Exane BNP Paribas estimated it could be valued closer to US$3 billion.

Paul Fox, a spokesman for P&G, said the company "will continue to focus our portfolio, allocating resources to businesses where we can create value and continuing to exit those where we cannot." He said the company does not comment on speculation when asked whether it would be open to selling the pet-care unit.

Chrissy Trampedach, a spokeswoman for Del Monte Foods, said the company does not comment on specific merger and acquisition plans.

Comments powered by Disqus




Read the April issue of Petfood Industry!

April 2015

The April 2015 issue of Petfood Industry looks at different pet food markets around the world. Read about Sojos, a US company which aims to transform the lives of pets through raw pet food. As these specialized diets become increasingly popular in the dog and cat food markets, learn how such trends are carrying over into bird and small animal food. Plus, see how pet food companies in Russia are reacting and reconsidering production strategies in the wake of rising prices due to exchange rate fluctuations.

READ MORE in Petfood Industry magazine