Del Monte’s Philippine unit to raise up to P16.7B in IPO

DEL MONTE Pacific Limited (DMPL) is taking its Philippine unit public, with plans to raise up to P16.7 billion to repay debts.

In a disclosure to the stock exchange on Tuesday, the listed canned fruit manufacturer said Del Monte Philippines, Inc. (DMPI) will be offering a total of 559.464 million shares to the public, or about 20% of its outstanding shares, for up to P29.88 apiece.

DMPI’s planned sale of a fifth of its shares would be the country’s biggest initial public offering (IPO) in 15 months and Southeast Asia’s largest for a food and beverage firm in nearly six years, Reuters said. The announcement comes as domestic demand for consumer goods remains strong despite the prospect of rising prices due to higher taxes on fuel.

DMPL said net proceeds of the offer will be used to partially prepay or repay debt, as well as for general corporate purposes.

“The prepayment of such loans will allow the DMPL Group to deleverage and strengthen its balance sheet. Such prepayment is allowed under the current loan facility agreements without any fee or penalty,” DMPL said in its disclosure.

The company said it submitted the IPO registration statement last Monday to the Securities and Exchange Commission. It will also have to get the approval of the Philippine Stock Exchange (PSE).

BDO Capital and Investment Corp. has been tapped as issue manager, sole global coordinator and sole book runner.

It would be the Philippines’ largest IPO since Pilipinas Shell Petroleum Corp.’s $ 380.79- million share sale in October 2016.

For the food and beverage sector, it would be the Philippines’ biggest on record and the largest in Southeast Asia since Felda Global Ventures Holdings Bhd’s $3.27 billion IPO in June 2012, Thomson Reuters data showed.

Sought for comment, Regina Capital Development Corp. Managing Director Luis A. Limlingan said DMPI’s IPO would be a welcome start for 2018.

“The market is starving for its first IPO of the year and Del Monte could be a welcome addition. Depending on the pricing and the growth prospects of the company then it would be attractive enough for both retail and institutional clients since they will be raising possibly more than $300 million,” Mr. Limlingan said in a mobile phone message.

“The company could readily use the proceeds since the agricultural sector has exhibited weak growth compared to the other constituents of GDP ( gross domestic product).”

DMPL, which is listed on both the PSE and the Singapore Stock Exchange, said it will seek the approval of its shareholders for the IPO through an extraordinary general meeting. Following the maiden share sale, DMPL will keep around 67% of its shareholdings in DMPI.

DMPI is an indirect subsidiary of DMPL through Del Monte Pacific Resources Limited’s Central American Resources, Inc. It sells canned pineapple juice and juice drinks, canned pineapple and tropical mixed fruits, tomato sauce, spaghetti sauce and tomato ketchup.

Around two- thirds of its sales are from Philippine operations, while the remaining one- third is from export markets under the S&W brand.

DMPL recorded a net loss attributable to controlling stakeholders of $2.8 million in the three months ending October, against an attributable profit of $19.97 million in the same period in 2016.

For DMPI alone, sales grew by four percent in peso terms, as the company increased penetration of its products in the market, but was down 2.9% in US dollar terms due to the weakening peso.

DMPL has been crafting ways to turn around the business. Last December, the company raised $100 million from the sale of Series A-2 preferred shares in order to pay its outstanding bridge loan from BDO Unibank, Inc. that is scheduled to mature in February 2019.

Shares in DMPL climbed 6.67% to close P11.20 apiece at the Philippine Stock Exchange on Tuesday, one of the biggest gainers amid losses for much of the bourse. — with inputs from