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Minnesota-based International Multifoods (IMC) "got a sweetheart deal" when it bought Pillsbury from General Mills late in 2001, paying a bargain price and acquiring permanent rights to the famous Pillsbury Doughboy, says Delafield fund co-manager Vincent Sellecchia.
Problem was, the deal forced International Multifoods to assume more than $350 million in debt. But Sellecchia and partner J. Dennis Delafield, who own a sizable chunk of IMC, weren't deterred. They look for companies that are experiencing temporary problems and whose stocks sell for less than what Delafield and Sellecchia think they're worth.
By jettisoning its less profitable distribution business and focusing on new-product launches, International Multifoods has been able to pay down nearly half of that debt. Analysts expect its earnings to climb 25% this fiscal year, to $1.72 per share. The stock sells at ten times that estimate.
-- Courtney McGrath
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