Del Monte

Del Monte: CIMB outlines that share price will remain weak this year as more details about the proposed acquisition of Del Monte Foods (DMF) emerge. This acquisition is a make or break event. Risks 1) US$100m breakup fee if DMP does not complete the deal 2) Proforma net gearing of 1.8x to 4.4x due to debt financing required for the deal 3) Execution risks CIMB says these negatives are well-known and appear to be priced-in. Even though DMP is growing at a respectable pace, CIMB notes that DMF is 4x of DMP, and net profit is 3x DMP. CIMB sees DMP adding beverages into the US product line up, and fine tuning US ops. CIMB says core earnings are currently unaffected, but expect US$4.3m transaction fee in 4Q13, and US$15-16m for 1Q14 CIMB rates DMP an Add with TP: $1.14