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Fresh Del Monte Produce, Inc. (NYSE:FDP)

3) Company History/Background

FDP's history cannot be disassociated from the Del Monte brand history. Back in 1880 the brand was initially used to designate a specific type of coffee served at the Hotel Del Monte on the Monterey peninsula (CA) by an Oakland based distribution company. That same firm officiated the use of Del Monte as its main brand in 1892 applying it to it's canned peaches. In 1898, together with other 17 companies, they merged into California Fruit Canners Association(CFCA), who elected Del Monte as its premier brand. Again in 1916 further consolidation in the industry resulted in the California Packing Corporation(CPC), once again the Del Monte remained its top brand.

It was back then that significant effort was put into marketing the Del Monte brand all through out the USA with somewhat cutting edge marketing tactics (in those days at least). Then, in 1979, CPC was bought by R.J. Reynolds Industries (later to become the prominent RJR Nabisco).

One year later RJRI decided to break up the company and spin it off has both Fresh Del Monte Produce Inc. (fresh produce) and Del Monte Foods (canned foods).

After years of mismanagement by several owners, FDP was bought by the IAT Group, a front for the Abu-Ghazaleh family. Mohammad Abu-Ghazaleh is the current patriarch of the palestinian family who has been involved in produce trading for many decades. In 1983 they invested directly in Chilean produce by founding the United Trading Company(UTC). After expanding considerably through the 80s, the Abu-Ghazaleh started to reach out into the international arena. Several optimizations to the cost structure turned out fundamental in leveraging growth into Europe and the US. It was also at that time that Mohammad Abu-Ghazaleh understood the value in growing and acquiring satellite businesses as to facilitate other operational activities that support the core business. Companies associated with logistics and refrigeration where added to the family's company portfolio.

In 1996 the family secured a loan that allowed them to, controversially, acquire FDP that, at the time, was in a dire situation. Mohammad Abu-Ghazaleh then sold UTC's assets to FDP, brought the company public and payed off FDP's debt with the cash resulted from the sale of equity.

Eventually, through a series of financial plays, Mohammad was able to transfer his personal control of FDP to the recently formed IAT Group (100% owned by the Abu-Ghazaleh family). The most likely reason for this operation is the ongoing lawsuit against both the IAT Group and Mohammad himself for, allegedly, bribing the former board of FDP to favor their bid in the 1996 acquisition of the company. By adding complexity to the ownership structure, future penalties will be very difficult to impute.

From that moment on, FDP grew into what it is today. By acquiring regional businesses and companies associated with operations, it now stands at a 1.5B market cap. The company had hiccups in operations, mainly during 2000-2002. But it recovered nicely due to particular efforts in cost cutting.

On a final note, it is relevant to mention pass ties that the company and the Abu-Ghazaleh have had with the Bush family. Marvin Bush was a board member from 1998 to 2003, and direct ties to the royal Saudi family can be made to the initial group of UTC investors.

Next section: 4) Operational Growth/Risk

Regards,

DCFNewbie
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