Seoul, June 30 - Del Monte Foods Co agreed to sell its seafood business including tuna brand StarKist to South Korean food group Dongwon for $363 million, creating the world's top canned tuna firm.
Del Monte, whose brands also include College Inn broths and Meow Mix cat food, had been considering the sale of StarKist, which it bought in 2002, as soaring costs of skipjack tuna weighed on its profits in recent quarters.
Dongwon Group, whose affiliates include the world's biggest tuna fishing company Dongwon Industries Co Ltd and processed food maker Dongwon F&B Co Ltd, said in a statement that the deal would create the world's biggest canned tuna business.
"We believe that the acquisition of StarKist seafood will help Dongwon establish a strong foothold and penetration in the U.S. market", Park In-gu, vice chairman of Dongwon's holding firm Dongwon Enterprise, said in a statement.
StarKist had a 37 percent share in the $1.8 billion U.S. global processed tuna market in 2007, according to Dongwon.
Del Monte, which faces continuing pressure from rising costs for ingredients and energy, said in a statement the sale proceeds will be used to repay debt.
"This divestiture will immediately help improve our margin structure, eliminate a source of earnings volatility and reduce our debt leverage," said Rick Wolford, Del Monte's chief executive officer, in a statement.
Del Monte now expects its 2009 fiscal year earnings per share from continuing operations to be "toward the lower end" of its 58 cents to 62 cents guidance range given on June 5.
Dongwon Group will set up a company in the United States to manage StarKist. With the StarKist purchase, the group also plans to expand in the South American and European canned tuna markets, Dongwon said.
Shares in Dongwon F&B rose 1.1 percent to 41,450 won by 0206 GMT and Dongwon Industries was up 0.75 percent to 134,500 won, outperforming the wider market's 0.11 percent loss.
The news of the deal was widely expected as Dongwon said last week that it was set to buy StarKist.
Dongwon was the second-biggest player in the Asia Pacific canned food market in 2006, trailing Japan's Hagoromo Foods Corp but ahead of Del Monte, according to Research and Markets.