Del Monte Pacific Ltd. said it is raising $130 million from the sale of a 13-percent stake in its Philippine operation, Del Monte Philippines Inc., to Singapore-based SEA Diner Holdings Pte. Ltd.
The transaction covers 363.65 million shares considering a price earnings (PE) multiple ratio of 15.7 times for Del Monte Philippines.
PE based on its earnings for the financial year ending April 2019, Del Monte said. It replaces the previous plan of the former to list its Philippine operation.
SEA Diner is a Singapore-incorporated company focused on investing in leading companies in the consumer sector in China and the Asean region. It has invested over $1 billion in Southeast Asia and Chinese consumer businesses to date, including consumer product and technology companies.
“The food category has been a key focus for the investor (SEA Diner) and its affiliates, with a particular emphasis on food products that have a large addressable market in China. The investor has over 30 staff in the region and intends to play an active role in supporting Del Monte Philippines,” Del Monte said.
It added the conclusion of the sale is subject to the completion of due diligence on Del Monte Philippines.
Del Monte said as part of the agreement, the sold shares will be converted into redeemable convertible preferred shares (RCPS) in the Del Monte Philippines, which can be converted into one share for every one preferred shares held.
The preferred shares will also be automatically converted if the Philippine operation does a public offering or another private sale of its shares is made.
Del Monte said in the event of an initial public offering (IPO), if the IPO pre-money market capitalization of Del Monte Philippines exceeds $2 billion, the conversion ratio would remain unchanged at 1:1.
However, if less, SEA Diner will receive shares “that will provide the Investor with a simple annual 3 percent yield,” Del Monte said.
“Del Monte Philippines shall use its best efforts to provide the investor an opportunity to sell all of shares held by the investor on or before the date falling five years from the completion of the proposed sale. In the event that Del Monte Philippines undertakes an IPO, the (SEA Diner) shall be given the first right (but not the obligation) to sell all of its shares in the IPO on terms no less favorable to the investor than those granted to the other existing shareholders,” it added.
Del Monte also said if an IPO or trade or private sale for SEA Diner does not occur on or prior to three years following the date of the agreement, the investor may require the company to engage a financial adviser from a list recommended by the Investor to advise on the possible valuation of Del Monte Philippines.
“In such event, Del Monte Philippines shall promptly appoint a financial adviser. Further, the investor (SEA Diner) may elect to require Del Monte Philippines to cooperate with the Investor on a best efforts basis to facilitate an exit to the investor either by way of an IPO or any private or trade sale,” it said.
However, if there is no liquidity event (IPO or trade sale) after five years from the closing of the proposed sale, the preferred shares shall be redeemed at the redemption price, which is an amount paid plus an 8 percent rate of return (compounded on a per annum basis) calculated from the closing of the proposed sale up to the date of redemption, subject to the mutual consent of both Del Monte Philippines and SEA Diner, Del Monte said.
