Switch to pet foods cuts Del Monte’s risk

Article Excerpt

DEL MONTE FOODS CO. $12 (New York symbol DLM; WSSF Rating: Extra risk) has agreed to buy the Milk-Bone dog biscuit business for $580 million. However, the benefits of tax losses effectively cut the price to $455 million. To put that in context, Del Monte earned $0.26 a share (total $52.0 million) in its third fiscal quarter ended January 29, 2006. The company recently sold its private soup and baby food operations to help fund its $705 million acquisition of the Meow Mix cat food brand. Pet foods tend to generate higher profits than these other businesses, so these purchases will help Del Monte’s long-term growth. But, it will take several months for the company to integrate these new operations. Del Monte is still a hold. hold…

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