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P&G May Sell Pet Food Unit to Del Monte

October 23, 2013

With Iams gone, company can focus on beauty and household business.

With sales stalling and expenses rising, Procter & Gamble is considering selling its pet food business to boost its stock price, free up some cash and become more focused on its core business, according to industry reports. The company may have a willing buyer for its Iams pet-food unit in Meow Mix maker Del Monte Foods Co.

P&G, which brought back AG Lafley as CEO in May amid calls from investors to improve sales, could boost its share price by selling assets including the Iams division, said shareholder HighMark Capital Management Inc. Del Monte Foods is now a logical buyer of Iams, said Exane BNP Paribas, because the private-equity owned-company is seeking to expand its pet products business after agreeing this month to sell its canned peaches and corn division for $1.68 billion.

P&G is languishing at a cheaper profit multiple than 86% of peers, according to data compiled by Bloomberg. Selling Iams could fetch P&G about $2.5 billion, said Sanford C. Bernstein & Co. For Del Monte Foods, buying the unit would bolster its position in the $20 billion U.S. pet-food and treats industry, pushing it past Mars Inc. for the No. 2 spot  in North America.

Neither P&G, nor Del Monte commented on the rumor.

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