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Analysts: RJR Sale Of Del Monte Strong Possibility

March 21, 1989

ATLANTA (AP) _ When it becomes time to sell off RJR Nabisco Inc. assets to help pay for Kohlberg Kravis Roberts & Co.’s buyout of the food and tobacco giant, Del Monte is ripe for the picking, industry analysts say.

Analysts said Monday that Del Monte, RJR Nabisco’s fruit and vegetable subsidiary, could net up to half the $6 billion in assets Kohlberg Kravis has said it plans to sell off to help finance its record $24.53 billion acquisition of RJR Nabisco.

″Bidding would be fairly lively,″ said Ronald Morrow, a managing director at Smith Barney, Harris Upham & Co. in New York. ″It could go to anyone in the canning business.″

Morrow said Del Monte would probably interest U.S. companies such as Stokely or Curtice-Burns.

″There’s no reason to think it would go to foreign interests,″ he said.

But Emmanuel Goldman, a beverage and tobacco analyst at PaineWebber Inc., said the most likely buyers for Del Monte would be Japanese, French, West German and British companies, although U.S. companies such as Quaker Oats Co. and Ralston Purina Co. might be interested.

″There are all these Japanese companies around that are flush with cash at 129 yen to the dollar,″ Goldman said.

RJR Nabisco said in a statement Monday it has not made a decision but has retained Goldman, Sachs & Co. to study a possible sale of Del Monte, along with other options.

Bob Young, vice president for derivative securities at Dean Witter Reynolds in New York, also said a Del Monte sale is a very strong possibility.

″KKR was selected because KKR stated intentions to not sell off RJR (R.J. Reynolds Tobacco), to not substantially distribute pieces of Nabisco,″ Young said. ″That makes the sale of Del Monte highly likely.″

″They have a lot of options,″ Young added. ″It’s difficult to see a negative for them from this.″

Del Monte, based in Coral Gables, Fla., produces canned, dried and fresh fruits as well as canned and microwave vegetables, juice drinks and snack foods. It employs 42,000 people worldwide and hires about 12,000 seasonal workers.

Pauline Howe, spokeswoman for RJR Nabisco in Atlanta, declined to speculate on Del Monte’s chances of being sold. She said the company was simply studying its options.

″I wouldn’t read any more into it than that,″ she said.