Texas Pacific Group will sell virtually all its remaining stake in Del Monte Foods Co., coming away with about a 100% profit on its 7-year-old $155 million equity investment in the San Francisco-based producer of StarKist tuna and Del Monte vegetables and fruit.
Del Monte said Friday, Sept. 10, that affiliates of TPG, a Fort Worth and San Francisco private equity firm led by financier David Bonderman, will sell 12.34 million Del Monte shares, its entire 5.9% stake. An affiliate, TPG GenPar LP, will retain a small holding of 6,589 shares, however.
TPG's current stake is worth about $135 million, based on Del Monte's closing price Thursday of $10.95 a share. The stock sale, in a secondary offering underwritten by Lehman Brothers Inc., is scheduled to close by Wednesday.
Executives at TPG declined to comment.
The sale will close out an investment dating to April 1997, when TPG bought Del Monte in an $833 million leveraged recapitalization. TPG originally invested $125 million in common and preferred equity, for a 78% stake, financial filings show. Late in 1997, TPG boosted its investment to $155 million, when Del Monte acquired Contadina canned tomato products from Nestlé SA.
TPG realized roughly $55 million in February 1999, when the company went public, and another $121 million this January via a secondary stock sale. It also reaped at least $17 million in advisory fees.
Under Richard Wolford, a former president of Dole Packaged Foods Co. whom TPG installed as CEO, Del Monte went on an acquisition tear. Besides Contadina, Del Monte in 1998 bought back the rights to the Del Monte brand in South America from Nabisco and also acquired Nabisco's canned fruits and vegetables business in Venezuela.
Wolford's biggest deal came in December 2002, when he engineered the $2.3 billion acquisition of a portfolio of brands from H.J. Heinz Co., including StarKist tuna, 9Lives and Kibbles 'n Bits pet foods, Nature's Goodness baby foods and College Inn soups. That more than doubled Del Monte's sales to about $3 billion. But the brands were among Heinz's weaker performers, and Del Monte has had to work hard to revive them — with some success.
Del Monte's share price has jumped more than 40% since the Heinz deal's closing. Nevertheless, the shares still trade well below the $15 per share initial public offering price. TPG will garner an annual compound internal rate of return on its investment of less than 15%.