Tastykake sale: Plants stay open; buyer to repay PA
Tastykake sold to Georgia-based Flowers Foods
Tastykake sale: Plants stay open; buyer to repay PA
Joseph N. DiStefano
Philadelphia's money-losing Tasty Baking Co. has agreed to be purchased by Flowers Foods, Thomasville, Georgia, for $4 a share. That's double the stock's recent price and a premium to anyone who bought the stock this winter, but a discount to Tasty share prices in recent years. Read Flowers' statement here.
The sale works out to $34 million in cash for Tasty's 8.5 million shares. "We are delighted to welcome Tasty's 740 dedicated employees and 413 independent sales distributors to the Flowers Foods family. Our plans are to invest in the combined business for sustainable and profitable growth, and they will be an important part of Flowers' ongoing success," says Flowers boss George Deese.
Flowers also says it will assume Tasty's "existing indebtedness" totalling around $131 million. That looks like good news for Pennsylvania taxpayers: Tasty had borrowed around $80 million for the company's new South Philadelphia plant, about half of which is owed to state programs, the rest to Citizens Bank and other lenders.
The deal is part of Flowers' ambitious strategy to grow beyond the South into a national chain of fresh and frozen snacks. Flowers says it will keep Tasty's new $80 million bakery at the Navy Yard complex in South Philadelphia and its second plant in Oxford, Chester County.
Flowers wants to sell Mrs. Freshley's sweet rolls, Nature's Own breads and other Flowers products "throughout Tasty's geographic footprint" in the mid-Atlantic states, and "will require additional acquisitions to add needed production capacity" to make that happen. Flowers also said it will offer Tastykakes down South. Spokeswoman Mary Crier had no immediate comment on what happened to a 2002 joint distribution deal between the companies.
Tasty in January asked creditors to delay payments while it sought a buyer or new investors, citing disappointing financial results from the new plant along with higher corn syrup costs and supermarket bankruptcies. The deal "ensures that Tastykakes will continue to be made by Philadelphians in Philadelphia," Tasty boss Charles Pizzi said in a statement distributed by Flowers.
Flowers is one of the companies identified by Costello Asset Management's Robert Costello as a likely Tasty buyer in my Jan. 5 post here.
"They did a phenomenal job getting the deal done. It could have been a bankruptcy," Costello told me. "It's an excellent company," he said of Flowers. "Return on equity is 18%. They're very efficient. There's no question they're going to change the way things are done here. It'll take a year, it won't happen overnight," he said. "Will (Flowers) cannibalize Tasty sales? Overall I think Tasty will benefit" if Flowers is able to market Tastykakes in parts of its Southern base.
Flowers had sought to buy Tasty in the past but talks led nowhere. Costello said Flowers would likely have closed Tasty's former Hunting Park plant if Pizzi hadn't built the new plant; if so, the move proved expensive for shareholders, while saving Tasty's Philadelphia jobs.
Flowers is publicly-traded, but the Amos McMullian family of Macon, Ga., remain major shareholders. Flowers makes Mrs. Freshley's sugary packaged snacks and Nature's Own breads, among other fresh and frozen products. Flowers is also a past owner of the former Mrs. Paul's frozen-foods plant in Pottstown.
great news , now maybe they can get those ' lines ' straight on the TastyClair Pies ???— ingy9- Your next update should inform readers how much Charlie Pizzi has profited over the years while running this company further into the ground. This guy's next job should be cleaning toilets at Citizen's Bank Park. What a fraud.— Vince70
- Maybe they can get back to making an edible product. That's generally the best way to succeed as a food company.— CiceroSpuriousDeodatus
- Leave Pizzi alone. None of this was his fault. Oh, wait...— JerryCurlan
- $4.00 a share?!?!?! HA, got robbed. That company is garbage and full of debt.— Fightens1
- Do you think they will begin to use transfats and real fruit flavor again or will they continue to have that cardboard taste..— chesterfield
- Yeah, great news - until the follow Breyer's out of town. Oh well.— Steve2181
- At least it wasn't sold to the Chinese!— dogman5
- This is the end of Philly culture as we know it! :) And Zappa, I agree with you that they will move jobs south eventually. Has anyone ever had a "Mrs. Freshley's" product? I have and they are not good.— Jen D
- Challenger
So getting rid of theunions weould be a bad thing?— green72 - Only if you really would like to earn a living wage for your work, IDIOT! — BEMiller
- Those who do not study history are doomed to repeat it. If you like things like safe working conditions, weekends, and decent wages, you can thank the unions, past and present. Every (honest) person can tell a story about the misuse of union power. But the bad aspects of having unions (like having to wait for some joker to finish his break before he'll plug in a power cord you could have plugged in yourself) are far outweighed by the good. Which is, in short, not having to live in a world where the John D. Rockefellers and the Sam Waltons make all the rules and workers are treated as disposable resources.
Comment removed.- Neither company makes anything that resembles a healthy snack. Obese Americans and Philadelphians should rejoice.— 42Homestead
- Now Charlie Pizzi can make the rounds portraying himself as a martyr and saving jobs. His horrible decision making over the years ran the place into the ground. Yet the Phila business community will continue to embrace him with open arms and call him a great leader(re: Joe Frick). Just because your local does not mean you know what you're doing and can run a business successfully - think about Ed Stefanski.— IBCeer
