Sweetheart Cup sale may cost jobs in Md.

Staff cuts at headquarters in Owings Mills predicted

December 24, 2003|By Lorraine Mirabella | Lorraine Mirabella,SUN STAFF

Jobs are in jeopardy at Sweetheart Cup Co. Inc.'s Owings Mills corporate headquarters as a result of Sweetheart's acquisition by Chicago-based Solo Cup Co., but production and distribution workers there may have less reason to be concerned, an industry expert said yesterday.

Solo, which is buying the 90-year-old paper cup and plate maker for an undisclosed price in a deal announced Monday, plans to close some offices and factories across North America in the coming year as it merges the two companies, leaving an uncertain future for Sweetheart's Maryland operations.

Sweetheart employs 1,600 workers at its headquarters and adjacent production facilities off Reisterstown Road. The company also operates a warehouse in Hampstead.

The Solo management team will review the performance of all Solo and Sweetheart plants during the first three months of 2004, including Solo's 12 U.S. plants, mostly in the Midwest, and 22 operated by Sweetheart in North America.

"Then they will develop a process to decide which facilities will get consolidated," said Solo spokesman Drew Ferguson. "There will be a consolidation of facilities."

Sweetheart has 7,442 employees across the nation, 6,218 of whom are hourly workers.

John R. Burke, president of the Foodservice & Packaging Institute in Falls Church, Va., said Solo will move to eliminate redundancies in the two corporate headquarters.

"I know what will happen under the name of synergy and finding synergies; they'll take a look and see where duplication exists between the headquarters," Burke said. "You only need one accounting department. Then they'll start taking a look at production capacities, and where they're duplicating, take capacity out."

He said the outlook might be brighter for Sweetheart's Owings Mills manufacturing facility.

"My sense of it is, they might well keep that, because it has good East Coast distribution," he said.

A spokesman for Sweetheart, Skip Boyles, did not return phone calls yesterday seeking comment.

Protecting Md. jobs

Maryland and Baltimore County officials said they had been meeting with Sweetheart officials about a rumored change in ownership and that they had met with Boyles earlier this month.

"At that time, I was assured he was not aware of any specific transactions, but it was made clear by Mr. Boyles that the situation could change very quickly," said David S. Iannucci, executive director of the Baltimore County Department of Economic Development. "We have not heard from the company today regarding the sale."

"This is a very important manufacturing company in Baltimore County," Iannucci said. "We will be working ... aggressively to get in front of the company and argue to protect these jobs."

The state gave Sweetheart a five-year, $2 million loan in 2002 to make plant improvements and buy equipment, with a sliding interest rate based on employment levels at Owings Mills.

Tori Leonard, a spokeswoman for the state Department of Business and Economic Development, said DBED officials had been meeting with Sweetheart as part of a continuing effort to stay in contact with Maryland companies, but that they have no word on plans for Sweetheart's facilities here.

"We are still trying to determine what the implications will be and are interested in working closely with them to keep these jobs in Maryland," she said.

The bottom line

Solo, a chief Sweetheart competitor and one of the nation's largest makers of plastic and paper cups and plates, expects to close on its planned acquisition of Sweetheart, a subsidiary of SF Holdings, during the first three months of 2004.

The merged company is expected to have combined sales of more than $2 billion, said John Woodard, a managing director of Vestar Capital Partners, a private equity firm that has made a "substantial" minority equity investment in Solo as part of the deal to acquire Sweetheart.

Sweetheart reported sales of about $1.3 billion in fiscal year 2003, while the privately held Solo reportedly had revenue of $900 million in 2001, the most recent figures available show.

"The businesses are very complementary businesses, both are in the same space," Woodard said. "Solo is a very strong, family-owned business. Both have very good brand names, and both have complementary strengths."

"As a private equity firm, we're in the business of backing businesses with strong management teams and strong brands," he said.

Robert Hulseman, Solo's chief executive, will stay on in that position, while Ronald L. Whaley will continue as chief operating officer. It was unclear whether Dennis Mehiel, chairman and chief executive of Sweetheart's parent company, SF Holdings, will remain on the management team.

Business in the foodservice packaging industry has been flat in recent years, and Sweetheart has clearly been struggling, experts said.

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