Bloomberg News

Del Monte, KKR Deal Faces U.S. Antitrust Probe, Lawyer Says

November 30, 2011

Nov. 29 (Bloomberg) -- Del Monte Foods Co.’s $5.3 billion sale to a group of private-equity firms led by KKR & Co. is the target of a U.S. Justice Department antitrust probe, a lawyer who sued over the deal said in a court filing.

Federal prosecutors have been “investigating the facts and circumstances surrounding the sale of Del Monte,” Stuart Grant, a lawyer for Del Monte shareholders, said in a Nov. 23 court filing as part of an $89.4 million settlement of investors’ claims over the deal.

Investors in San Francisco-based Del Monte argued in the lawsuit in Delaware Chancery Court in Wilmington they weren’t getting enough for their shares in the buyout. Other shareholders, who filed a related federal court suit in San Francisco, questioned whether private-equity firms rigged bids to artificially lower the price paid for the maker of Meow Mix cat food and Milk Bone dog biscuits.

Gina Talamona, a Justice Department spokeswoman, declined to comment yesterday on whether the antitrust division was investigating the Del Monte buyout. Kristi Huller, a KKR spokeswoman, and Chrissy Stengel, a Del Monte spokeswoman, didn’t immediately return calls seeking comment on the filing yesterday.

The settlement also resolves investors’ claims that Barclays Plc, which served as Del Monte’s financial adviser while providing some financing for the buyers, had conflicting interests in the deal. The private-equity group led by New York- based KKR included Vestar Capital Partners and Centerview Partners LLP.

Delayed Vote

Delaware Chancery Court Judge Travis Laster ordered Del Monte in February to delay a shareholder vote on the deal so investors could consider whether to back it in light of disclosures about London-based Barclays’s dual roles. Laster will decide whether to approve the settlement at a Dec. 1 hearing.

Investors who sued in California alleged that KKR and New York-based Vestar colluded to suppress the amount paid for Del Monte. Vestar and KKR had originally competed to buy the consumer-products maker before joining forces, according to court filings.

Grant said he got a request from federal prosecutors for documents and other court filings related to the Delaware case this year.

“They never said specifically who they were interested in,” Grant said yesterday in a phone interview.

The investigation came to light after a Cleveland-based retirement fund for a local pipefitters union objected to the proposed settlement in Delaware.

California Claims

The fund, which held more than 8,000 Del Monte shares at the time of the merger, sued in California to raise the antitrust allegations. Its lawyers argued in a Nov. 21 court filing in Delaware that the settlement would wipe out claims about anti-competitive behavior that could be worth millions to investors.

In response, Grant said in his Nov. 23 filing that the California antitrust suit against Del Monte had been dismissed and lawyers for the fund hadn’t refiled it. He noted that federal prosecutors could proceed with the antitrust claims if the suit wasn’t refiled.

Grant said he’d been “working closely with the Department of Justice’s Antitrust Division in its effort to investigate” claims of collusion and prosecutors were “capable of addressing any violation of federal antitrust laws that occurred in connection with the sale of Del Monte.”

The Delaware case is In re Del Monte Foods Co. Shareholder Litigation, CA6027, Delaware Chancery Court (Wilmington).

--With assistance from Seth Stern in Washington, Karen Gullo in San Francisco and Phil Milford in Wilmington, Delaware. Editors: Michael Hytha, Peter Blumberg

To contact the reporter on this story: Jef Feeley in Wilmington, Delaware, at jfeeley@bloomberg.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net


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