Del Monte Wins Approval of Settlement of KKR Buyout Suits

Del Monte Foods Co. and Barclays Plc won a judge’s approval of a $89.4 million settlement of investor lawsuits over the buyout of the pet-food maker by a group of private-equity firms led by KKR & Co.

The accord, which gave Del Monte investors about 50 cents more a share, “provides excellent consideration,” Delaware Chancery Court Judge Travis Laster said before approving the settlement today at a hearing in Wilmington.

Investors in San Francisco-based Del Monte, maker of Meow Mix cat food and Milk Bone dog biscuits, alleged they were shortchanged in KKR’s buyout, for which London-based Barclays provided some financing. Shareholders received a total $19.50 a share as a result of the accord, according to court filings.

Kristi Huller, a KKR spokeswoman, couldn’t immediately comment on Laster’s decision to approve the settlement today and Kerrie-Ann Cohen, a Barclays spokeswoman, declined to comment. Chrissy Stengel, a Del Monte spokeswoman, didn’t immediately return a call seeking comment.

The accord resolves claims that Barclays, which also served as Del Monte’s financial adviser, had conflicting interests in the $5.3 billion deal because of its financing for the buyers. The private-equity group led by New York-based KKR included Vestar Capital Partners and Centerview Partners LLP.

Collusion Alleged

Other Del Monte investors alleged that KKR and Vestar colluded on the offer for Del Monte and filed an antitrust suit in federal court in California. The private-equity firms at one time vied against each other to buy the consumer-products maker, the suit contends.

The U.S. Justice Department has launched a probe of the antitrust claims over the Del Monte buyout, Stuart Grant, a lawyer for investors who sued in Delaware, said last week in court papers.

The Del Monte shareholders who’d sued Del Monte and KKR in California sought to have Laster reject the state-court settlement because it would wipe out their claims.

The judge refused, finding the allegation of collusion didn’t amount to a “meaty case” and federal prosecutors were better able to press antitrust claims if they exist.

Grant, who represented a pension fund who’d invested in Del Monte, said he was proud of the settlement because it threw a spotlight on the conflicting roles banks sometimes play in buyouts.

‘Message Sent’

Del Monte investors noted in their suit that Barclays was paid $23.5 million to advise Del Monte on the deal while also receiving as much as $24 million for providing loans to the buyers. Wall Street firms have shied away from providing such loans in the wake of Laster’s rulings in the Del Monte case, Grant noted.

“We’ve been able to change a Wall Street practice that was more prevalent than people thought,” he said. “A message was sent through your honor’s opinion that this kind of interested transaction” won’t be tolerated, Grant added.

As part of the settlement, Laster today approved a total of $22.3 million to cover Del Monte investors’ legal fees and costs in bringing the case.

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

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