Executive Business Briefing

Here is a look at more of Thursday's top business stories:

Heinz sells several units to Del Monte Foods

PITTSBURG, June 13 (UPI) -- H.J. Heinz Co. said it has signed a definitive agreement to sell a number of its U.S. businesses, including the well-known StarKist seafood brand and its 9-Lives cat food, to Del Monte Foods Co.

Under the agreement Heinz's U.S. StarKist seafood, North American pet food and pet snacks, U.S. private label soup, College Inn broth, and U.S. baby food businesses will merge with Del Monte in an all-stock transaction.

The companies said that the businesses generate about $1.8 billion, or 20 percent, of Heinz' annual sales and that the boards of both companies approved the plan.

Heinz said it will roll the operations into a new subsidiary that will be spun off to Heinz shareholders and immediately merged into a unit of Del Monte.

Del Monte said the deal will boost its annual sales to about $3.1 billion, which is well ahead of the $1.51 billion the San Francisco-based company reported for the fiscal year ended June 30.

Under terms of the deal Heinz shareholders will receive approximately 0.45 shares of the new Del Monte company common stock for every one share of Heinz common stock they own.

At the close of the transaction, Heinz shareholders will own approximately 74.5 percent, and Del Monte shareholders will own approximately 25.5 percent of the newly merged company.

The transaction is expected to be tax-free to the shareholders of both companies.

As a result of the merger, Del Monte is expected to assume approximately $1.1 billion in debt associated with the spun-off businesses.

The transaction is expected to be accretive to Del Monte shareholders.

The new company will retain the Del Monte name.

Included in the transaction will be the following brands: StarKist, 9-Lives, Kibbles ' n Bits, Pup-Peroni, Snausages, Naw somes!, Nature's Goodness Baby Food and College Inn broths.

Richard G. Wolford, chairman and chief executive officer of Del Monte, said, "These brands are a great strategic fit with Del Monte. With this transaction, Del Monte is strategically positioned with higher-margin, powerful brands and increased scale focused in the center store.

"The similarities of our businesses will drive significant synergies which we will use to invest in and reinvigorate these brands and at the same time target bottom line growth. These new brands will be core to our business and will be fully supported by increased marketing spend and Del Monte's brand-building and supply-chain expertise. Through the reinvigoration of these brands and the realization of synergies, we will be a financially stronger company, well-positioned to deliver shareholder value," Wolford said.

William R. Johnson, chairman, president and chief executive officer of H.J. Heinz, said, "We were committed to ensuring that these businesses, which have been an important part of the Heinz family for many years, became part of an organization that shares similar values and heritage.

"We believe that under Del Monte's proven leadership and years of consumer product experience, these brands, and the talented Heinz people joining the newly merged company, will grow with the new Del Monte," Johnson said.

Following the transaction, approximately 5,000 Heinz employees will transfer to Del Monte.

There is expected to be minimal impact on the size of either the Heinz or Del Monte workforces.

The deal is subject to regulatory approvals, customary closing conditions, and the receipt of a ruling from the Internal Revenue Service that the transaction is tax-free.

The transaction also requires the approval of Del Monte shareholders. Texas Pacific Group, which owns approximately 47 percent of Del Monte's outstanding common stock, has committed to vote its shares in favor of the transaction.

The transaction is expected to close at the end of the calendar year 2002 or early 2003.

Heinz also said its fourth quarter earnings including special items rose 18.2 percent to $223.5 million, or 63 cents a share, from $170.5 million, or 49 cents a share during the same period last year on the strength of acquisitions.

The world's biggest ketchup maker said its sales rose 4.8 percent to $2.57 billion from $2.46 billion a year ago.

Analysts on Wall Street Had expected Heinz to post a net income of 62 cents a share, according to Thomson Financial/First Call.

Lucent sees revenue falling 10 to 15 percent

MURRAY HILL, N.J., June 13 (UPI) -- Lucent Technologies Inc. said its expects third quarter revenue to decline by 10 percent to 15 percent, to $2.99 billion to $3.17 billion, on a sequential basis from the $3.52 billion recorded in the fiscal second quarter, due to continuing market softness.

The company's revenue estimate is below a Thomson Financial/First Call survey of Wall Street analysts of $3.52 billion.

Previously, Lucent said it would not provide third-quarter revenue guidance due to market uncertainty.

In last year's third quarter, Lucent reported a loss of $1.89 billion, or 55 cents a share, from continued operations, on revenue $5.82 billion. On an ongoing pro-forma basis and excluding items, the company lost 39 cents a share.

In its April earnings report, the company said, assuming no significant change in revenue levels, that it expected modest sequential improvement, on a pro forma basis, in its third quarter earnings.

Lucent said Thursday that due to its projected third quarter revenue levels, it now expects sequential earnings improvement from the pro forma loss of 20 cents a share in the second quarter.

The 20 cent per share loss includes a 6 cent a share tax charge. Lucent said sequential improvement over the 14-cents-a-share loss, excluding the tax charge, is possible for the fiscal third quarter, though it is "too early to call" citing current market conditions.

A First Call survey of analysts produced a third quarter estimate for a pro forma loss of 10 cents a share.

Lucent's pro forma results are defined as results from continuing operations, excluding business restructuring and one-time charges, amortization of goodwill and other acquired intangibles, the results of its optical fiber business and the one-time gain associated with the sale of the optical fiber business.

"Service providers continue to constrain their capital spending to conserve cash, which is clearly affecting our top line," said Lucent's chief executive Patricia Russo, who noted that the company is seeing declines primarily in wireline systems in North America.

Lucent said it remains on track with its restructuring efforts and still expects to reach an employee base of about 50,000 by the end of its fiscal year Sept. 30.

In April, Lucent said it initially planned to cut its work force by 15,000 to 20,000, but had already eliminated 23,600 jobs as of March 31, bringing its total work force to 56,000, excluding Agere Systems Inc.

In early April, the telecommunications equipment maker unveiled plans to cut as many as 5,000 more jobs by the end of June. The cuts would bring its head count to just above 50,000, which is less than half the 106,000 workers it had in January 2001.

Lucent also plans to provide an update on its efforts to reduce its breakeven point, or the amount of revenue it must bring record to reach profitability, at its July 23 earnings announcement. The company noted that it continues to target a return to profitability and positive cash flow during fiscal 2003.

In April, Lucent said its break-even point will be lower than the $4.25 billion in revenue it had initially determined, due to market uncertainty. The company noted that it is working toward a break-even revenue figure that is "somewhat" below $4 billion.

Lucent said it has more than sufficient liquidity to fund its operations and business plans and has no outstanding balance on its credit facility. It amended certain financial covenants of its credit facility to provide "additional flexibility in an uncertain market," the company said.

Petco expects higher sales

SAN DIEGO, June 13 (UPI) -- Petco Animal Supplies Inc., the nation's second largest pet supply specialty retailer, affirmed its quarterly and full-year earnings view, citing strong sales and improving profit margins.

The company said it expects sales at stores open at least a year, a key indication of retail performance, to rise about 7 percent in the second quarter, which ends in July, and between 7 percent and 8 percent for the full year.

The 571-store chain said it still sees earnings of 14 cents to 15 cents a share for the quarter, compared with a year-earlier pro forma profit of 8 cents.

Petco said it sees full-year pro forma earnings between 84 cents and 85 cents a share, up from 52 cents last year.

The targets are in line with Wall Street estimates, which are expecting 15 cents a share for the second quarter and 85 cents for the full year, according to Thomson Financial/First Call.