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.
Good news at least for now look at all the jobs they saved until the new company figures out how to save money, there assuming all the debt leftover. Somewhere down the line there going to consolidate or cut cost but for now all the employee's get to stay. Positive news for a struggling retail economy.....In this area the name Mrs. Freshley's is not popular they have a display of various cakes in some Pathmark stores.....The economy is horrible I hope things improve but with gas going up it means less to spend on other things.
Who here food shops at Walmart or buys store brands at there local grocery store to save $$$?? I know I do.— merchandiser- being a transplant to the far south, we only get tandykakes, crimpets and cupcakes sent down. I had a recent encounter with my favorite, the Peach Pie. 1st, i'm sad to say they weren't baked right or slightly browned, and 2nd and most importantly, what the H is with those pie plates? The best thing was being able to open one end and slide it forward bite by bite without ever getting your hands messed up. Trivia question for you. DO you know the 1st product made by Tasty?........................................ it was the chocolate junior.. The great unanswered question is. Why did they only slice the top half of the cake.— dedhed
- they will be out of here lickety split. the brand new building will sit and rot then be demolished. Breyer, Tastykake, Hersey in Mexico. Let's see how many more need to go before someone cares. Philly unemployment rate is 10.4% and soon to rise.— dontlikedems
- All I know is that when I die the coroner will determine cause of death as overdose from a combination of jelly and butterscotch krimpets, peanut butter Kandykakes and chocolate juniors.— ChiefClancyWiggum
- Mrs. Freshly's stuff is really bad.Flower foods make Tastykake look like gourmet offerings. Flowers Foods and TastyKake, Bad plus bad equals horrible.— Wildman Bill
- Plain and simple, poor product quality was the reason that Tastykake's profits declined. For example, the chocolate on the Kandykakes nows tastes waxy and artificial. The spongecake used in the Krimpets is now sticky, too sweet and has an artificial taste. In fact, most of their products have an artificial taste and unusual texture. There is barely any frosting on the Coconut Juniors. I was a loyal fan of Tastykake for many years, but stopped buying their products when the quality diminished. In my opinion, within two years, the Tastykake name will completely disappear.— Kuss947
- Flowers can well afford to buy Tastycakes. A $2.6billion dollar company can handle the debt. $4 per share is a good deal for the share holders. We should wish Flowers well, even the tax payer who supported the debt of Tasty make out. The only real question does this mean we have to do the Tomahawk Chop and root for the Braves?— vc bear
- If my southern wife is any indication of the product's marketability in the south, I would say this is a good move by Flower Foods. People in the south love their sweets (their regional BMI readings indicate this fact). Whatever folks say about the decline of the TastyKake product line, its national competitors are even worse. If you cannot sell a butter scotch krimpet to an overweight region raised on sweet tea and fried food, where can you?— bobcitydoc
- They just built the new factory up here, the company will not be leaving town you fools. I am annoyed they were bought by a Georgia company though, and not Hershey of Bimbo.— Capsulef
- No company buys another to lose money. They will eventually sell the plant in Philly and move operations to the South which will significantly reduce their operating expense. Lower paid, non-union employees, more friendly tax structure, etc.— blackknight
- The people commenting that the taste of Tastykakes has changed because of the removal of trans fats do not know what they are talking about. Trans fats (i.e., partial hydrogenation) increases product shelf life and decreases refrigeration requirements. It does not make food taste differently. Tastykakes taste just fine. That's not the reason the company has been failing.— JT123
- What happened to Bimbo ? I thought that they were in the running.— EastPhilly
- Drakes Ring Dings— JeetYet
- Don't care if its trans fats or the new factory. Either way the product appearance and taste has declined greatly. The pie tins are wasteful and don't cook the pies right. The last 2 pies i bought were half empty. The icings and fillings are screwed up constantly. I saw coffee cake juniors on the shelf the other day that only had a small clump of crumbs in the middle - how does stuff like that pass quality control ? Its a joke.— 92gli
- This is good news for those of us who have fled to the South for warmer climes. Hopefully we will be able to get TastyKakes from our local Flowers distributor.
Using their distribution system, it could only spell good times for Tasty Baking Co.— hoagie
