Sager Creek, former Allens, sells to Del Monte for $75 million

by The City Wire staff (info@thecitywire.com) 856 views 

The one-time family-owned Allens Inc., of Siloam Springs has been sold to canning rival Del Monte Foods for $75 million in cash. The deal was with Sager Creek who purchased the Allens out of bankruptcy last year for $124.78 million.
 
San Francisco-based Del Monte Foods is one of the largest food companies in the United States and the Sager Creek business will add about $250 million in additional revenue from brands like Veg-all, Freshlike, Popeye, Trappley’s and Allen’s.

“This acquisition provides Del Monte the opportunity to expand on Sager Creek’s Foodservice business platform and new retail product offerings while driving significant operating synergies in our network of vegetable production facilities,” said Nils Lommerin, CEO of Del Monte Foods.

Allens, Inc. was founded in 1926 and owned and operated by multiple generations of the Allen family. Sager Creek employs about 1,000 people in Arkansas, Wisconsin and North Carolina facilities, which will be taken on by Del Monte.

The City Wire reported last year that Sager Creek, owned by a venture capital firm, would likely dismantle the 87-year-old food company or sell it off.

JOBS QUESTION
Del Monte’s move does raise the question of management jobs remaining in Siloam Springs. The city’s chamber leader is hopeful job losses will not result.

“The conversations we’ve had with Del Monte indicate that this well-known food company wants to make Sager Creek’s operations a subsidiary rather just merge operations,” said Wayne Mays, CEO of the Siloam Springs Chamber of Commerce. “They obviously did their homework and saw value in this business, which is a good thing for our community."

If there is any long-term concern regarding the deal, Mays said there is the risk some of the local management jobs could be pulled away, but there has been no indication of that.

“There are no plans to move positions at this time. “We will be working with Sager Creek management to ensure that our teams are positioned in a way that both businesses can succeed," said Tim Schramm, spokesman for Del Monte and Sager Creek represented by Coyne Public Relations.

One interesting aspect of the deal is Del Monte expects to utilize Sager Creek to bolster its foodservice business, and Sager Creek CEO Chris Kiser has experience in the foodservice industry. Kiser has more than 20 years experience in the food business, from his early years as a vice president for Campbell Soup Company to managing national accounts for Diago, to nearly seven years at Pinnacle Food as executive vice president of sales. He later spent three years as president of AdvancePierre Foods, overseeing the company’s retail and foodservice business.

Growers like Dave Chamberlain of Maysville are also happy about the deal.

“I think it’s a good thing. Del Monte knows the business and we have been told that we should no major changes under the new ownership. I am glad for that,” he told The City Wire.

Chamberlain is set to plant 144 acres of green beans for Sager Creek, not Del Monte this spring. The crop will be up from 80 acres of beans he planted last year.

“We didn’t have the opportunity to grow any fall beans last year, but maybe we will under this change. At one time I was growing 400 acres for Allens but things got so shaky there we backed off and grew more wheat and soy beans,” Chamberlain said.

He has raised green beans for Allens and Sager Creek for more than two decades and said most years it has provided steady income for the family farm.

CHALLENGING BUSINESS
Del Monte bought the Sager Creek business out of its revolving credit facility, but the canned food giant itself has struggled to turn a profit amid higher operating costs in recent quarters.

The canned food industry has been challenged by changing consumer preferences for fresh produce. Grocers from Wal-Mart to Kroger to Amazon are investing in fresh capabilities that draw consumers away from the center of the store to the fresh fruits and vegetables that line the perimeter of grocery stores.

The buy local movement has also taken root with farmer’s markets and other local grocers like Harp’s and Allen’s Foods in Bella Vista – no relation to the canning company – who routinely feature fresh fruits and vegetables from local farms.

In the most recent financial statement Jan. 25, Del Monte reported net annual sales of $1.282 billion, with net losses of $47.2 million. While net sales increased from $1.228 billion the cost of products sold also rose.

Allen’s was forced into bankruptcy in October 2013 after a 30% decline in revenue in 2012. Allens officials made several moves in 2012 to shore up business, including a March 2012 announcement that Allens was selling six frozen vegetable brands to the French company, Bonduelle Group.

The company also announced in early 2012 that the company would move operations and 150 jobs from Van Buren into an Allens canning operation in Siloam Springs. The company’s Van Buren warehouse operation was expected to remain open.

Consolidating the canning operations came more than 30 months after Van Buren operations were expanded. In June 2010 the company announced a more than $20 million expansion that included a $13.5 million investment in the company’s Van Buren operation. The $13.5 million investment in Van Buren expanded the company’s capacity to process sweet potatoes.

LINGERING BANKRUPTCY ISSUES
The Sager Creek business is not hindered by the lingering claims from suppliers to Allen’s who have sought payment for PACA claims during the past two years. The Perishable Agricultural Commodities Act (PACA) facilitates fair trading practices in the marketing of fresh and frozen fruits and vegetables in interstate and foreign commerce

On March 5, the PACA claims for immediate payment filed by D&E Farms, H.C. Schmieding Produce and Hartung Brothers were denied by U.S. Bankruptcy Judge Ben Barry.

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