Divesting a non-core division with a thin market …
“I have worked with a variety of merger and acquisition specialists, and I concluded that Mertz was perfect for our U.S. Stick assignment. I received top-level attention every step of the way. Mertz provided the same intensity level and professionalism for a smaller transaction as I would expect for a larger transaction.”
– John Redick, V.P. Finance of Little Rapids
“Godfrey and Kahn frequently and confidently refers work to Mertz. Attorneys at our firm who are active in mergers and acquisitions find that Mertz is among the best in their niche.”
– Andy Lauritzen, Godfrey & Kahn
“The Mertz offering document for this transaction was exceptionally well written and offered a tremendous amount of pertinent information and analysis. A thorough offering document helps immensely when we evaluate a target. In fact, such a document can stimulate interest we might not otherwise have.”
– Jon Vesely, Code Hennessy Simmons
Little Rapids, a privately held company with multiple shareholders, hired Mertz to divest its U.S. Stick operation. U.S. Stick, a well-known and recognized name within its markets, accounted for 30 percent of the wooden ice cream stick market and 40 percent of the corn dog stick market nationally. While the ice cream stick market was growing at a three to five percent rate per year and the corn dog stick market at 10 to 15 percent per year, Little Rapids wanted to sell because neither market fit with its other operations.
Little Rapids serves the specialty papers industry, and its products include gowns, modesty drapes and exam table paper for the medical industry.
Scope of Mertz’s role
Mertz advised Little Rapids in divesting the division by designing a selling program, preparing offering materials, developing a customized database, contacting potential purchasers, evaluating proposals and participating in negotiations.
The market for U.S. Stick was thin because the facilities were special purpose and without a synergistic buyer, upside was limited. Furthermore, there were very few synergistic buyers, two of which were competitors.
There were two logical marketing approaches. One was to contact only the identified possible synergistic buyers. The other was to market aggressively and develop other, less obvious prospects. Little Rapids, a serious seller, elected to market aggressively.
Multiple parties expressed interest and toured the facilities after being qualified by Mertz. Multiple letters of intent were submitted.
Norse Dairy Systems a leading supplier of ice cream filling machinery, packaging (paper, plastic, or plastic foam) and baked goods (cones) in the worldwide ice cream novelty industry, purchased U.S. Stick.
When the sale project began, Norse Dairy Systems was not on Little Rapids’ list of possible synergistic buyers. However, because Mertz carefully tracks private equity groups and their holdings, Code Hennessy & Simmons (a private equity group with $1.6 billion under management) was identified and contacted as a potential prospect because it owns Norse Dairy.
Mertz’s value add
The aggressive marketing provided detailed and definitive feedback about the market for U.S. Stick and options for the board of Little Rapids. The board could confidently select the best option as it represented and served Little Rapids’ shareholders.