One of the wackiest deals in the produce industry keeps getting wackier. After months of on-again, off-again negotiations, Univeg announced back at Fruit Logistica in Berlin that it had signed a letter of intent to buy Ready Pac, an event we analyzed here.
It was always a unusual situation. Typically these types of announcements are made jointly but Ready Pac was stone silent for weeks. We actually sat on the story for a week until we could find someone from Ready Pac to confirm the letter of intent existed.
Now Ready Pac issues a statement without mentioning the Letter of Intent or Univeg and says it has received an investment from a private equity firm named Bayside Capital:
READY PAC FOODS, INC.
BY BAYSIDE CAPITAL
Irwindale, CA (April 10, 2007) — Ready Pac Foods, Inc. (“Ready Pac” or the “Company”) announced today that it has received a strategic investment from Bayside Capital, a leading private equity firm. Ready Pac is an industry-recognized innovator of fresh-cut produce and fresh prepared foods with facilities located throughout the United States. The Company has been delivering the highest quality packaged salad, fruits and vegetables for over 30 years. Terms of the transaction were not disclosed.
Ready Pac Chairman and CEO Dennis Gertmenian commented, “We are excited to partner with a premier private equity firm to help facilitate our growth. Bayside’s investment allows us to accelerate our 38-year history of partnering with our customers to bring high quality innovative new products to market while providing excellent service.
“Bayside views our investment in Ready Pac as a flagship investment in the fast growing fresh prepared foods industry segment. We will leverage our financial resources to enhance the company’s operational excellence and industry leadership,” said Tiffany Kosch of Bayside Capital. “The Company has an outstanding management team, leading market position and, with our resources, is well-positioned to capitalize on the many opportunities created by the strong customer demand for its products,” added Anthony DiSimone of Bayside Capital.
ABOUT BAYSIDE CAPITAL
Bayside Capital is an affiliate of H.I.G. Capital, a leading private equity investment firm specializing in acquisitions and recapitalizations of middle market businesses. Based in Miami, Florida, and with offices in Atlanta, Boston, and San Francisco, the firm is one of the most active private equity investors in small and medium-sized companies. H.I.G. manages in excess of $3 billion of committed equity capital to support its investment activities.
We wanted to find out more, so we asked Mira Slott, Pundit Investigator and Special Projects Editor, to get clarification:
Executive Vice President-Chief Financial Officer
Ready Pac Foods
Q: How does the strategic investment from Bayside Capital impact Univeg’s and Ready Pac’s signed letter of intent to enter into a business transaction?
A: We did enter into a non-binding agreement with Univeg back in December. At the same time, a number of different companies were interested in investing in Ready Pac. As we continued to explore options, we decided the best option was with Bayside Capital.
Q: Does this end the Univeg deal or could this be a prerequisite to a further deal with Univeg?
A: We were impressed with the Univeg proposal. We chose Bayside Capital to deal with versus Univeg. However, Univeg is a large international company. Potentially down the road, we could do business transactions with them.
Q: So to be clear, Ready Pac will not be pursuing an additional deal with Univeg?
A: The Bayside investment is a replacement deal. We chose Bayside instead of Univeg. I will caveat that by saying that is what I know.
Q: Negotiations with Univeg seemed to reach a standstill during the time period when Ready Pac was being impacted by Taco Bell’s food safety issues. Did this play a factor in the decision-making process?
A: The further in the distance these industry challenges go, the more positive the outcome for Ready Pac. A number of companies expressed interest in strategic investments with Ready Pac, and Univeg was one of them. We’re moving forward with the Bayside Capital transaction, the deal is basically finished. Bayside Capital has every intent of making this a long-term transaction and so does Ready Pac. We are putting all this behind us and focusing on growing our business.
Bayside Capital is not just any private equity fund. As its web site explains:
Bayside specializes in assisting companies to overcome financial or operational challenges. We have extensive experience in out-of-court restructurings, plans of reorganization, bankruptcy sales, DIP financings and related transactions.
In fact, Ready Pac should be able to get more business from at least one customer as Bayside also has an investment in another turn-around play, Marsh Supermarkets.
Just as it was odd for Ready Pac not to mention the letter of intent with Univeg in its announcement, it is equally odd that Univeg hasn’t said a word publicly, even keeping the LOI announcement on its web site.
Normally one would expect a joint announcement that the LOI had been terminated by mutual agreement.
The fact that this hasn’t happened may mean nothing or may mean that Univeg disagrees with Craig Delaney’s assessment that the LOI was non-binding. Which means there could be litigation.
Also, despite Mr. Delaney’s characterization of the Bayside investment as “long term,” the Pundit has never met a private equity fund whose favorite holding time is not two seconds. Perhaps Univeg, with a strategic interest in Ready Pac, still hopes to acquire or partner with the now-recapitalized Ready Pac.
What is clear is that Ready Pac, however its ownership shakes out, is likely to have the resources to be a competitor in the capital-intensive fresh-cut sector.
The Pundit thinks Ready Pac should be looking at our piece, Boskovich Sues Taco Bell. Ready Pac wasn’t treated much better, and Taco Bell’s actions implied there was some fault by Ready Pac. Very possibly this deal, or a better one, could have closed months ago without Taco Bell’s actions. There may be some real liability there.
In any case, let us all welcome Bayside Capital to the produce industry. As they will learn, it is an exciting business.