Pinnacle Buyout Saves Swanson Plant

The Swanson frozen foods plant in Fayetteville, which employees about 950 people, won’t be firing any workers after being bought out of bankruptcy by Pinnacle Foods Corp. of Cherry Hill, N.J.

Instead, the new owners are looking to increase volume and add workers at the plant, said Lou Pellicano, senior vice president for Pinnacle Foods.

“If anything, we’re looking into doing acquisitions and adding volume to that plant,” he said. “We hope to increase the capacity, the volume and the employees.”

Pellicano said the Fayetteville factory will continue to make Swanson frozen foods, and other products may be added to the assembly line there.

The plant was previously owned by Vlasic Foods International, the pickle company that was one of eight businesses spun off by Campbell Soup Co. in 1998. Vlasic made the top-selling pickle brand in the United States.

Vlasic filed for Chapter 11 bankruptcy protection on Jan. 29 and initially agreed to sell its core pickle business and its line of Open Pit barbecue sauce to H.J. Heinz Co. for $195 million. But that deal fell through.

In May, Vlasic’s North American assets (which also included the Swanson frozen foods business) were bought out of bankruptcy proceedings for $370 million by Pinnacle Foods, which was created by Hicks, Muse, Tate & Furst, a Dallas-based private investment firm.

The three Vlasic businesses, which had sales of more than $750 million in fiscal 2000, will be the principal operating assets of Pinnacle Foods, a newly formed company that will be based in the former Vlasic offices in Cherry Hill. C. Dean Metropoulos, who is a partner in Pinnacle Foods, will serve as CEO of the company.

Hicks, Muse has teamed up with Metropoulos to acquire and manage other food industry businesses, including International Home Foods.

J.P. Morgan Partners and Lexington Partners will join Hicks, Muse as equity investors in the Vlasic transaction.

In May, Pinnacle laid off about 70 nonunion employees nationwide from a total Vlasic work force of 3,000. According to newspaper reports, 10 employees were laid off then at each plant. But no more would be fired in Fayetteville, Pellicano said.

Kevin Lowery, former vice president of public affairs for Vlasic, said the Swanson division accounted for about half of Vlasic’s annual revenue. Vlasic has two Swanson plants. Besides the Fayetteville plant, the company has another of similar size in Omaha, Neb.

In April, 2000, Vlasic completed a $325 million refinancing for its Fayetteville plant with a loan from Morgan Guaranty Trust Co. of New York.

Vlasic had been in financial trouble ever since the Campbell Soup spinoff. At that time, Vlasic inherited $500 million in debt from Campbell Soup.

In its filing for protection from creditors under Chapter 11 of the U.S. Bankruptcy Code, Vlasic listed assets of $458.3 million and debts of $650 million.

Hicks, Muse targets underperforming companies and builds them up for resale. Some of its successful acquisitions include Dr Pepper and Seven-Up.

Hicks, Muse, Tate & Furst was formed in 1989 and has completed or has pending more than 390 transactions with a total capital value of more than $47 billion. It specializes in investments in the branded food, manufacturing and media industries. Based in Dallas, it has offices in New York, London and Buenos Aires, Argentina.

“The leveraged buyout firm assembles limited partnership investment pools and targets companies in specific niches that can be used to form a nucleus for other investments,” Hoovers Online said of Hicks, Muse.

Tom Hicks, a partner in the buyout firm, owns the Texas Rangers baseball team and Dallas Stars ice hockey team. The formerly public Vlasic will now be privately held Pinnacle Foods.