Del Monte Foods to acquire Milk-Bone, other Kraft pet products for about $580 million

SAN FRANCISCO (AP) _ Del Monte Foods Co., one of the nation's largest distributors of canned fruit and vegetables, said Thursday it is adding more pet products to its business, agreeing to acquire

Thursday, March 16th 2006, 10:41 am

By: News On 6

SAN FRANCISCO (AP) _ Del Monte Foods Co., one of the nation's largest distributors of canned fruit and vegetables, said Thursday it is adding more pet products to its business, agreeing to acquire Milk-Bone dog treats and other brands from Kraft Foods Inc. for about $580 million.

The deal comes two weeks after Del Monte announced plans to buy catfood maker Meow Mix Holdings for $705 million and is part of Del Monte's larger plan to focus on having strong brands.

``Milk-Bone, with its strong brand position in the fast-growing and dynamic pet snacks category, will significantly strengthen our overall competitiveness in the pet business,'' Chairman and Chief Executive Richard G. Wolford said in a statement. ``It is another key step forward for Del Monte as we deliver against our overall strategic commitments.''

Del Monte's acquisition costs will be somewhat offset by about $125 million in related tax benefits. The company, which plans to fund the deal with added debt, expects the transaction to have a dilutive affect on its fiscal 2007 earnings when taking into account integration costs, but be ``meaningfully'' accretive to fiscal 2008 earnings.

Milk-Bone is a leader in dog snacks, generating revenue of about $180 million in 2005.

Northfield, Ill.-based Kraft said selling the Milk-Bone brand will allow the company to better focus on its core products. The sale includes Kraft's Milk-Bone manufacturing plat in Buffalo, N.Y., and the Sherburne Pet Food Testing Center in Sherburne, N.Y. About 230 Kraft employees, including a business team in East Hanover, N.J., will join Del Monte.

Kraft said it will take an impairment charge on the deal of 4 cents per share in the first quarter and incur added tax costs of 3 cents per share, for a total 2006 impact of 7 cents per share. Ongoing dilution is expected to be 2 cents per share.

The transaction requires regulatory approval and will close shortly after all regulatory approvals have been received, Kraft said.