Campos wants Filipinos to lift the debt burden of US Del Monte

Joselito “Butch” Campos Jr. has found a brilliant solution to lift the debt burden of his loss-making Singaporean holding company, Del Monte Pacific Ltd., and his Del Monte Foods in the United States. Raise money from the Filipino public. The media-averse sibling of Unilab heiress Joy Campos-Hess is seeking regulatory approval to raise P17.5 billion through the Philippine Stock Exchange by listing the money-making Del Monte Philippines. Del Monte Philippines happens to be a subsidiary, the little brown brother as it were, of Del Monte Pacific, which is duallisted in Singapore, its home base, and in the Philippines.

Del Monte Pacific, in turn, owns Del Monte Foods in the United States that Campos acquired in 2013 for $1.7 billion through leveraged buy-out, whose dollar-denominated loans amid weakening US sales are now threatening to rip Campos’ pockets.

Incidentally, the market capitalization of the Singaporean parent, together with the overgrown but anemic US sibling, happens to be about P17.5 billion, the same amount that the Philippine subsidiary can raise by selling only 21 percent of itself to the public.

Campos’ plan, currently Campos awaiting approval from the Securities and Exchange Commission, is to offer Del Monte Philippines at P29.88 a share, three times more than the current share price of the parent Del Monte Pacific Ltd.

“The prepayment of these loans will allow the DMPL Group to deleverage and strengthen its balance sheet,” including that of its US subsidiary Del Monte Foods, Campos said in a preliminary prospectus.

The Singaporean parent said it planned to settle its US dollar-denominated loans by June and July, racing ahead of the two more expected Fed rate hikes for 2018. Among the debts that have to be prepaid include $53 million from RCBC.

“Such prepayment is allowed under the loan facility agreement/s without any fee or penalty,” said Campos, whose official title is chairman and president of Del Monte Philippines.

Incidentally, not a single centavo would accrue to the Philippine company or its 25,000-hectare pineapple plantation in Mindanao.

The planned initial public offering is by way of a secondary offering from a Panama company, Central American Resources Inc., the little-known Campos firm that owns Del Monte Philippines lock, stock, and barrel.

After payment of the offer-related expenses of nearly P1.26 billion, including P417.8 million for underwriting and selling fees, the Panama firm will “upstream” the proceeds by way of dividends to its parent, Del Monte Pacific Resources Ltd., which in turn will remit them to Singapore’s Del Monte Pacific as dividends.

As a pre-IPO sweetener, Del Monte Philippines said it intends to maintain an annual cash dividend pay-out ratio of 33 percent – the same dividend policy as that of its struggling Singaporean parent – of its consolidated net income.

The Philippine company posted a net income of over P2.7 billion in 2017 on the back of P26.7 billion revenues.

The Singaporean parent-conglomerate, on the other hand, reported a net loss of US$40.4 million for the first nine months of its 2017-2018 fiscal year, mainly due to plant closures in the US mainland and the write-off of deferred tax assets.

Even more striking is the Singaporean parent’s admission that the net asset value of the Philippine subsidiary at US$323 million dwarfs the Singaporean parent and the American sibling combined at US$255 million.

It was not too long ago that there were “A” and “B” shares of Philippine blue-chips, A shares reserved for the natives and the more expensive B shares for the foreigners, mainly American shareholders.

With the prospect of two listed Del Montes in the local bourse, this time is definitely different. Money talks

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E-mail: moneygoround.manila@yahoo.com