International Multifoods Corp has announced that it has completed the sale of its foodservice and vending distribution business to Wellspring Distribution Corp., a newly formed affiliate of Wellspring Capital Management LLC, under the original terms of the agreement.

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In July, Multifoods announced that it had entered into an agreement to sell the distribution business to Wellspring for $180 million in cash, subject to closing adjustments, including the level of working capital (for further information on the initial agreement, just-food.com members click here). This price assumed working capital at closing of US$135m. Since then, working capital in the distribution business improved US$14m from the estimate to US$121m, which resulted in cash proceeds of US$166m, the company said in a release.


Multifoods will use the US$166m of cash proceeds from the divestiture plus US$15m of cash from the distribution business to reduce debt by approximately US$180m.


The company also noted that the buyer is assuming the primary obligation on the operating leases for the distribution business’s warehouses and vehicles that have a net present value of approximately US$60m, which further reduces Multifoods’ leverage.


After applying the proceeds to repay debt, Multifoods’ total outstanding debt is expected to average approximately US$370m in the second half of its fiscal year ending 1 March, 2003, down from nearly US$600m following the closing of its acquisition of the Pillsbury desserts and specialty products business from General Mills in November 2001.

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“The sale of our distribution business is a critical step in Multifoods’ transformation into a more predictable, higher-margin branded packaged food company,” said Gary E. Costley, International Multifoods’ chairman and chief executive officer. “Foodservice distribution is no longer a strategic fit for Multifoods. The sale of these non-core assets allows us to pay down debt and strengthen our balance sheet as we prepare for future growth. With this divestiture behind us, we are now well positioned to drive sustained growth and enhance shareholder value by concentrating our resources on food manufacturing and building on our strengths in baking products.”


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