MorrisAnderson Manage Sale and Wind Down of High Profile Chicago Company

Challenge

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Parent company of Fannie May Candies, Fanny Farmer Candies. Manufacturing, distribution and retail of candy. $172 million sales. $30 million debt.

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• Company experienced several years revenue declines, margin erosion and operating losses.
• The Company had gone through two bankruptcies in three years and accumulated excessive debt through failed acquisition attempts.
• The Company had a single antiquated manufacturing facility in Chicago where production costs were well over industry averages.
• The Company owned many underperforming stores in remote geographies.
• The Company had strong union contracts in both the Chicago manufacturing plant as well as the retail operation making labor cost reductions very difficult to achieve.
• Company was highly seasonal. About 70% of revenues were made within four holiday periods and significant working capital was needed April through October.

Solution

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• MorrisAnderson became CRO.
• Created a plan to conduct an orderly sale and/or liquidation of the Company to optimize the value of each asset.
• Outsourced product production to another manufacturer to allow for a going concern sale of Canadian subsidiary, Laura Secord.
• Developed a liquidation timeline to optimize the sale of inventory consistent with the seasonality of the product to optimize return.
• Found a lender to finance the wind down plan and eventual liquidation which would most likely be through a bankruptcy process.
• Launched a sale process for US based assets that would bring a stalking horse bidder to the table at the correct time.
• Reduced operating cost as much as possible to minimize losses while executing the plan; including layoffs, union concessions, closing of nonperforming retail stores and consolidation of the product line.
• Closely coordinated all activities to optimize total recovery.

Results

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• Secured financing for sale/liquidation plan.
• The inventory was 100% sold during the Christmas period and following January.
• The announcement of closing created a “run” on the product and all inventory was sold at full retail. That gained an additional $5-7 million for the estate over estimated recoveries.
• Sold Canadian subsidiary, Laura Secord as a going concern business, based on having a proven source of continuing supply, at a price that exceeded original valuations by $8 million.
• In the auction of US assets, the proceeds exceeded the stalking horse bid by more than double.