Trying to get out of a pickle, Vlasic files for bankruptcy

January 30, 2001|By BLOOMBERG NEWS

WILMINGTON, Del. - Vlasic Foods International Inc., maker of Vlasic pickles, filed for bankruptcy court protection yesterday to help speed the sale of two of its best-selling brands to ketchup maker H. J. Heinz Co.

Cherry Hill, N.J.-based Vlasic is seeking to sell its namesake line of pickles and Open Pit barbecue sauce to Heinz in a bankruptcy auction, Vlasic spokesman Kevin G. Lowery said.

Pittsburgh-based Heinz is offering $195 million for the brands as an opening bid.

Vlasic shares have fallen 86 percent in the past year as sales slumped and debt mounted. The company, which has a stork as a pitchman for its pickles, has had a profit in three quarters since it was spun off from Campbell Soup Co. nearly three years ago.

"They were dealt a difficult hand," said Mitchell Pinheiro, an analyst at Janney Montgomery Scott who has a "hold" rating on Vlasic stock.

"They were saddled with $500 million debt, which didn't seem all that onerous at the time [Vlasic was spun off], given cash flow. But the cash flow was deteriorating and the need of the brands was greater than first thought."

Vlasic listed $458.3 million in assets and $649.9 million in debts in its Chapter 11 petition filed in U.S. District Court in Wilmington.

Trading in shares of Vlasic, which had sales of $901.5 million in fiscal 2000, was delayed on the New York Stock Exchange after the Chapter 11 filing. The shares were unchanged Friday at 63 cents. Shares of Heinz, the world's largest ketchup maker, rose 33 cents to $43.95 yesterday.

"We've negotiated a deal that I believe is a fair price for the business," said Heinz North America President Joseph Jimenez. It's too soon to tell what Heinz will do if Vlasic receives higher bids, he said.

The units had about $300 million in sales last year.

Vlasic also may sell other parts of its food business, which includes Swanson frozen foods, as part its Chapter 11 case, officials said.

Executives are weighing how to shed more than $200 million in debt the company has racked up over the last several years. Vlasic has $20 million in cash on hand and is arranging $25 million in financing to pay for the reorganization, Lowery said.

Joseph Vlasic started the pickle company in Detroit's Polish community in the early 1940s. Campbell bought the company in 1978.

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