NEW YORK (AP) -- Del Monte Foods Co. on Thursday agreed to be bought for $4 billion in cash by a group of investors that includes its former owner in what would be the biggest private equity deal of the year.
An investor group led by Kohlberg Kravis Roberts & Co. -- which briefly owned Del Monte -- Vestar Capital Partners and Centerview Partners agreed to buy the food maker for $19 per share. They will also assume $1.3 billion in debt.
The purchase price is a 6 percent premium to the stock's closing price on Wednesday, though the stock has soared recently on published reports about a possible buyout. The stock is up 59 percent since the beginning of the year, including a 12 percent jump on Nov. 18 when rumors of the deal surfaced.
Del Monte, based in San Francisco, is the owner of several well-known pet-food brands, including Kibbles 'n Bits, Meow Mix and Milk-Bone. It also has food brands under the Del Monte, Contadina, College Inn and S&W names.
The private equity firms in the deal have a long history with food makers.
KKR has bought food and beverage companies such as Beatrice Cos., RJR Nabisco and Borden Foods. It acquired Del Monte as part of its $25.1 billion leveraged buyout of Nabisco in 1989, and then sold Del Monte soon afterward. And Centerview's co-founder, Jim Kilts, is a former CEO of Kraft.
It is also the second pet-food deal of the year for KKR, which acquired British pet retailer Pets At Home in January.
After a lull during the recession, more private equity deals are springing up. At $4 billion, the Del Monte deal is the largest private equity acquisition of the year, ahead of Extended Stay Inc., which agreed to be bought in May for $3.92 billion.
Consumer goods companies have been popular targets lately, which could mean that private equity firms are feeling increasingly confident that consumers are likely to start spending more and keep it up.
On Friday, clothing seller J. Crew Group Inc. agreed to be taken private for $3 billion by TPG Capital and Leonard Green & Partners. And Burger King Holdings agreed to be taken private for $3.26 billion in September.
Del Monte CEO Richard Wolford said the deal "delivers substantial shareholder value and is a clear endorsement of Del Monte's strategic success and effective execution."
In its last fiscal year, which ended in May, Del Monte Foods' profit climbed almost 42 percent while revenue rose 3 percent to $3.74 billion. But in September, Del Monte said its fiscal first-quarter revenue softened on weakness in the consumer business and the company trimmed its expectations for revenue growth this year.
Over the past 10 years, the company has grown through acquisitions, and is now a company that gets more than half of its revenue from pet food. In 2006, it sold its retail private label soup and gravy business as well as its U.S. infant feeding business and acquired the Meow Mix and Milk-Bone brands. It began trading publicly in 1999.
Del Monte can solicit other offers through Jan. 8.
Copyright 2010 The Associated Press.