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Del Monte absorbs Heinz brands


US food group Heinz is to spin off a range of famous brands in order to focus on its fast-growing ketchup business, the company said on Thursday.

In a complicated $1.8 billion (€1.9bn) deal, Heinz will create a new subsidiary that will be spun off to Heinz shareholders and merge into a unit of Del Monte, which is the country's largest food distributor.

"Heinz will become a faster-growing, more focused, international food company, targeting consistent earnings per share increases of 8 to 10 per cent per year and targeting 3 to 4 per cent increases in annual sales following this transition year," said William R. Johnson, chairman, president and CEO of Heinz.

Investors reacted negatively to the announcement sending shares down 4.9 per cent, or $2.05, to $39.55 but in contrast Del Monte's shares rocketed 8.4 per cent, or 90 cents, to $11.65.

The businesses, which include Kibble's 'n bits, College Inn broth and the US baby food businesses, currently generate 20 per cent of Heinz's revenue.

Heinz shareholders will receive 0.45 shares of Del Monte stock for each Heinz share they own, which closed Wednesday up 10 cents at $10.75, in addition to retaining their current Heinz shares.

Following the deal, Heinz will own about 74.5 per cent of Del Monte.

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