Del Monte Foods Company of San Francisco, Calif., has sold all its rights in the IVD and Medi-Cal pet product brands as well as its rights in the Techni-Cal brand in the United States and Canada, to Royal Canin for $82.5 million.
Under the agreement, which as of press time was pending regulatory approval, Del Monte and its subsidiaries will manufacture certain products and perform certain services for Royal Canin during a transition period.
"These brands should be well-positioned for future growth with Royal Canin," said Richard G. Wolford, Del Monte chairman and chief executive officer. "They are not, however, a strategic fit with the plans we have defined and are implementing with our core pet portfolio. We expect that our core pet products business will play a key role in Del Monte's future growth and, to date, we are quite pleased with the progress we are realizing with this business."
The brands sold to Royal Canin, which are veterinary diet pet foods, generated approximately $57 million in fiscal 2003 for Del Monte. Del Monte expects to apply approximately $60 to $65 million of net proceeds to pay down debt outstanding under its senior credit facilities.
In a related move earlier this year, Del Monte, whose brands will continue to include 9 Lives, Kibbles 'n Bits and Nature's Recipe, negotiated a lower interest rate for its senior credit facilities.
Under new terms, the company paid off its existing Term A facility, increased its term B loan (due in 2010) to $883 million and reduced the interest rate on its term B loan from LIBOR plus 3.75 percentage points to LIBOR plus 2.25 percentage points. Its revolving credit line was reduced 100 basis points to LIBOR plus 2.50 percentage points.