Vlasic Files for Chapter 11; Swanson Safe for Now
by January 31, 2001 11:12 am 103 views
Vlasic Foods International Inc. filed for Chapter 11 bankruptcy protection on Jan. 29. and agreed to sell its core pickle business and its line of Open Pit barbecue sauce to H.J. Heinz Co. for $195 million.
Analysts speculate that Vlasic will also sell its Swanson frozen dinners business, possibly to ConAgra Foods Inc.
A spokesman for Vlasic said the Chapter 11 filing and sale of the pickle and barbecue sauce divisions wouldn’t affect the company’s Swanson plant in Fayetteville, which has about 950 employees.
“We’re not changing a thing,” said Kevin Lowery, vice president of public affairs for Vlasic, in Cherry Hill, N.J. “But we have flat out said that we will consider all our options.”
Lowery said the Swanson division accounts for about half of Vlasic’s $900 million in annual revenue.
Vlasic has two Swanson plants. Besides the Fayetteville plant, the company has a plant of similar size in Omaha, Neb.
In April, 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 it and seven other companies were spun off from Campbell Soup Co. in 1998. At that time, Vlasic inherited $500 million in debt from Campbell Soup.
If the company also sells the Swanson line, Vlasic would have no more U.S. brands. It has frozen food and canned vegetable units in Great Britain.
In 1999, Lowery told the Northwest Arkansas Business Journal that Vlasic’s problems could be attributed to the company’s nine U.S. mushroom farms and a tax increase of $2.3 million per year levied against the company’s Swift-Armour canned meat division in Argentina. Those problems accounted for $30 million to $40 million less in earnings that year, he said. Vlasic responded by selling the Swift-Armour plant to managers of the operation.
But the problems seem to go much deeper than that.
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.
Vlasic is considering a restructuring in which debt would be exchanged for equity, the company said in a statement. It continues to explore the possibility of selling one or more of its remaining businesses.
Heinz expects the deal to close within three months. Heinz will maintain the Vlasic brand name on the pickle line, although the Vlasic company will not be required to change its name.
Vlasic said its pickle business and the barbecue sauce line had combined sales in fiscal 2000 of $300 million. Vlasic pickles are the top-selling pickles in the United States.