Philadelphia-based Dietz & Watson Inc., a maker of high-quality deli meats, is negotiating to buy the long-troubled Parks Sausage Co. of Baltimore, sources in the industry and close to the talks say.
No deal has been reached and both companies declined to discuss whether they are talking about a sale. It is not clear whether a sale would include just Parks' building and equipment, or the whole business complete with its unionized work force.
"There's no deal until there's a deal," said an industry source.
The sale -- if completed -- could mean more jobs for the Park Heights-based firm, which employs about 50 union workers. According to sources, Dietz & Watson plans to significantly boost production at the plant, which operates far below capacity.
Dietz & Watson, founded in 1940, is a privately held company with more than $100 million in revenue. Parks, founded in 1951, at one time had more than $20 million in revenue and 220 workers, but has seen sales fall to the point that suppliers are not extending credit and are demanding cash on delivery, according to a source familiar with the negotiations.
The troubled Parks Sausage was rescued from bankruptcy with much fanfare in September 1996 by former Penn State University football teammates and professional football stars Franco Harris and Lydell Mitchell. Harris, who had operated the company while it was under bankruptcy protection, agreed to pay $1.7 million and assume $3.9 million of its debt; as part of the arrangement, three major creditors, including Baltimore, forgave half of $8.2 million in secured loans.
In addition to the 85 jobs it saved, the deal was important symbolically because it saved a Baltimore brand name known for its "More Parks Sausages, Mom -- Please!" slogan and, more significantly, Parks' status as a minority-owned firm.
According to industry experts, Harris and Mitchell made most of the right moves in their attempt to transform the struggling company's fortunes.
The company had shut down for a time while in bankruptcy and when it reopened management did not recall to work the 80 people responsible for sales and distribution of the company's products in the Northeast, opting instead to use independent food brokers.
Parks also outsourced some of the products that it felt could be made more cheaply by other firms. And its leaders tried to re-establish the company's strong regional brand name with a promotional campaign that partnered it with Tropicana, the orange juice maker.
Some of those strategies worked. Cutting the sales force cut costs, as did some of the outsourcing, company observers said. Harris, the former Pittsburgh Steeler who runs the successful Pittsburgh-based Super Bakery Inc., is said to have put a substantial sum of his own money into Parks. Mitchell, who played for the Baltimore Colts, ran the day-to-day operations.
Despite all the changes, the business continued to struggle and Harris and Mitchell recently gathered union officials and said they would not operate the business past Jan. 1, said Bruce J. Drasal, executive vice president of the United Food and Commercial Workers Local 27, which represents workers at the Parks plant.
"Franco Harris is as fine a guy as you'd ever want to meet -- I'm not opposed to saying that," Drasal said. "It's a shame they couldn't make this work. We'd appreciate if anyone comes into that building, that they consider our membership as future employees" of Parks.
Parks' challenge is like that facing most companies in today's global market: Size. It's a challenge that's driven giants such as HTC Mobil Oil Corp. and Bankers Trust Corp. to seek out bigger
partners. With size comes economies of scale that lets firms cut costs and offer their products or services to customers at lower prices.
"Franco and Lydell had a hard time getting above sea level," said the industry source.
"They are entrepreneurs, but they were undercapitalized. Their brand name [today] is not particularly strong outside the Baltimore area. They've just really struggled."
Ironically, the very thing that helped get Parks Sausage in trouble is the very thing that made the company attractive to Dietz & Watson: the state-of-the-art headquarters and production facility on Reisterstown Road. Parks built the $16 million facility after it was forced to move from its downtown location to make way for the Baltimore Orioles' Camden Yards baseball park. The plant proved more than the company needed, particularly after it lost major contracts with Pizza Hut and Domino's Pizza.
Dietz, which supplies meats such as hot dogs, ham and turkey to supermarkets such as Giant Food Inc. and Super Fresh Stores throughout the Baltimore-Washington region, during the summer was tapped as a key supplier to Giant, prompting it to expand its Philadelphia factory, industry sources said.
Pub Date: 12/11/98