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Stock Commentary

Del Monte Pacific confirm US subsidiary considering IPO to pay off high-yield bonds

Merkado Barkada
Del Monte Pacific confirm US subsidiary considering IPO to pay off high-yield bonds

In a clarifying disclosure in response to an article in a Singaporean paper on September 11, Del Monte Pacific [DELM 15.62 2.76%] confirmed that the management team of its US subsidiary, Del Monte Foods Inc (DMFI), is considering an IPO as one of its options available to finance the repayment of some high-yield bonds that it issued last year. In the alternative, DELM said that DMFI could opt to use a refinancing loan, but that nothing yet has been decided.

DELM did not provide any clarification on the potential IPO timeline mentioned in the article, which said that any DMFI IPO could take 18-24 months to “materialize”. DELM owns 93.6% of DMFI’s common stock.


MB BOTTOM-LINE

DELM is not a sentimental company. It seems to evaluate a potential IPO with all the hope, passion, and emotional gravitas of an excel spreadsheet with the “Potential Profit” row sorted in descending order. For DELM, a potential DMFI IPO would only be a means to an end.

DMFI needs to get some high-interest debt off its books and it’s going to choose the method that most efficiently achieves that outcome. Just my own personal opinion here, but I have no doubts that DELM is seriously considering taking DMFI public to pay off those bonds, just the same as I have no doubts that they’d cancel any such IPO plans without a second thought if another easier or cheaper method appeared at any stage in the pre-IPO process.

Just consider DELM’s cancellation of the proposed Del Monte Philippines IPO in 2018 and then again in 2021: I’m not going to hold my breath for the DMFI IPO, but I’m also not going to be surprised if it actually happens! Still, considering the proposed timeline that went uncorrected, it doesn’t seem like anything will happen for quite some time yet, if it does at all.

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Merkado Barkada's opinions are provided for informational purposes only, and should not be considered a recommendation to buy or sell any particular stock. These daily articles are not updated with new information, so each investor must do his or her own due diligence before trading, as the facts and figures in each particular article may have changed.

DEL MONTE PACIFIC LIMITED PHILIPPINE STOCK EXCHANGE
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