Brynwood's Stella D'oro At Odds With Union
Union workers seek to narrow the private equity firm’s exit options.
July 23, 2009
Brynwood Partners’ investment in cookie maker Stella D’oro has been anything but easy. Now that the private equity firm is looking to exit, it appears the investment is only going to become more difficult, as a union, backed by legislators in Washington, is seeking to dictate how the firm exits its investment.
Brynwood acquired the cookie and breadstick maker from Kraft Foods in January 2006 through an all-cash deal. Terms weren’t disclosed at the time of the sale.
While Brynwood has seen the company’s sales increase, it hasn’t been able to make the company consistently profitable, tallying $3 million in operating losses since its acquisition.
Headaches have emerged in the form of an ongoing dispute with labor, climaxing when members of the Local 50 of the Bakery, Confectionery, Tobacco Workers and Grain Millers International went on a strike that lasted 11 months. In response to a lawsuit, the National Labor Relations Board ruled in favor of the union, allowing the striking employees to return to work earlier this month.
Brynwood, effectively conceding that its hands are ties, moved to put the company on the block. This decision, however, only stoked the fire of the company's supporters. Yesterday, the Web site of Stella D’oro’s striking workers called for supporters to picket in front of Goldman Sachs’ 85 Broad Street headquarters in Manhattan. The impromptu notice alluded to a possible sale to Lance Inc. that it claimed “would relocate production to one of the non-union facilities it already owns.”
“We’re rallying outside Goldman Sachs because, as one of Lance’s high-profile investors, they have the power to dissuade Lance Inc. from going through with this damning deal,” the notice explained.
Meanwhile, politicians have also jumped into the fight. New York Congressman Eliot Engel called for a boycott of Stella D’oro in a speech in front of the House of Representatives.
“I want to let Brynwood Partners know that I am not going to be quiet about this or take this lying down,” he said, according to a transcript. “There are other things that Brynwood Partners own, and we really ought to scrutinize and watch everything they do because if they are allowed to get away with this, they can get away with anything, if nothing more than the bottom line, as far as I am concerned, corporate greed.”
The company issued its own statement in response, refuting the inevitability of a shutdown should Brynwood find a buyer. The company conceded it’s a possibility, but noted others also “include selling the business as a going concern, selling the business to a buyer with its own manufacturing capabilities, or permanently closing the plant and selling off the company’s assets among others.”
Brynwood is apparently taking the threat seriously. The firm removed its “latest news” section from its Web site, and no longer provides any indication of its current holdings.
It’s uncertain how this dispute will impact the firm’s future endeavors in the foods segment, an area in which it has been active in the past. It counts Richelieu Foods and DeMet’s Candy Co. among its holdings. Calls placed to a spokesperson at Sard Verbinnen & Co. were not immediately returned by press time.
The ongoing dispute is similar to the situation involving Alliant Techsystems, which felt the wrath of lawmakers after it announced plans to shutter Eagle Industries' New Bedford, Mass., plant following its acquisition.
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