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Basch Report
Jax Daily Record Thursday, Dec. 19, 201905:10 AM EST

Judge approves Acosta Chapter 11 plan

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The Jacksonville-based sales and marketing company will give stock to creditors in exchange for about $3 billion in debt.
by: Mark Basch Contributing Writer

Acosta Inc. said Dec. 16 it received bankruptcy court approval of its prepackaged reorganization plan and it “expects to successfully emerge from Chapter 11 in the coming days.”

The Jacksonville-based sales and marketing company, along with several affiliated companies, filed Chapter 11 petitions Dec. 1 in U.S. Bankruptcy Court for the District of Delaware. 

The main case was filed under the name Anna Holdings Inc., a holding company formed by The Carlyle Group when the investment firm bought Acosta for $4.75 billion in 2014.

The reorganization plan will give stock to creditors in exchange for about $3 billion in debt, but court filings don’t show who will be receiving stock and end up as the owners of the company.

Acosta said in a memorandum of law filed Saturday in support of confirmation that it began negotiating with lenders to restructure the debt in August and by November, it had the approval of a majority of creditors.

The memorandum said Acosta now has unanimous support of all creditors who hold the $3 billion in debt. 

“The Plan, and the remarkable consensus it represents, is the product of months of good-faith, arm’s-length negotiations among the Debtors, their first lien lenders, senior noteholders, and other key constituents, who all worked towards a consensual, value-maximizing restructuring,” it said.

The restructuring includes a rights offering and direct investment to bring $325 million in new capital, “sending a strong message to the Debtors’ employees, vendors, clients, and other business partners that they are well positioned for future success,” the memorandum said.

The company’s Chapter 11 filings have not included full financial reports. But a filing Monday showed Acosta projects a negative cash flow from operations of $23.1 million for the 13 weeks ending Feb. 28.

International Flavors merging with DuPont unit

International Flavors & Fragrances Inc., with operations including an aroma chemical plant on Jacksonville’s Westside, announced an agreement Sunday to merge with a unit of DuPont de Nemours Inc.

The combination of New York-based IFF and DuPont’s Nutrition & Biosciences subsidiary creates a company with more than $11 billion in annual revenue and a range of products in the taste, texture, scent, nutrition, enzymes, cultures, soy proteins and probiotics categories.

The companies did not announce a name for the merged business.

“Together, we will create a leading ingredients and solutions provider with a broader set of capabilities to meet our customers’ evolving needs,” IFF Chief Executive Andreas Fibig said in a news release.

Fibig will be CEO of the merged business. DuPont shareholders will get 55.4% of the shares of the company and IFF stockholders will own 44.6%.

The companies said the merged business has an enterprise value of $45.4 billion.

IFF has operated the plant at 2051 Lane Ave. N. since it acquired Bush Boake Allen Inc. in 2000 for $970 million. The Jacksonville plant was the headquarters for Bush Boake’s aroma chemicals division.

The plant employs about 100 people, an IFF spokesman said Monday.

IFF has about 13,000 employees and DuPont Nutrition & Biosciences has more than 10,000. 

Analyst sees more questions at Maxwell House parent

It’s been nearly a year since news reports surfaced that Kraft Heinz Co. wanted to sell its Maxwell House coffee business as part of an overall restructuring.

The company apparently never found a suitable buyer for the business and its Downtown Jacksonville coffee plant, and it could be well into 2020 before any decisions are made.

“Kraft Heinz is now pivoting to reinvent its core capabilities, rebuild credibility with customers/investors, and take a more ‘consumer-obsessed’ path to future decision-making,” Deutsche Bank analyst Steve Powers said in a report on the company last week.

“However, the heavy lifting has only just begun and lots of questions remain,” Powers said as he resumed coverage of the company with a “hold” rating.

Maxwell House is an iconic brand but it has been struggling to compete with specialty coffee brands.

The nearly century-old Jacksonville plant at 735 E. Bay St., which employs about 200 people, is Maxwell House’s last U.S. plant.

Powers said other old-line Kraft Heinz brands also are struggling, and the company has been considering selling them.

“While such plans appear to be shelved, we still believe divestitures of these or other businesses could be a means by which Kraft Heinz reduces gross debt,” he said.

“In many ways, Kraft Heinz is the poster-child for the food industry’s past missteps,” he said.

“Not long ago, Kraft Heinz was viewed as perhaps the crown jewel of food/consumer packaged goods companies. Today, however, Kraft Heinz is a true turnaround—burdened with high debt and eroding market shares.”

It may be a few months before Kraft Heinz reveals any turnaround plans, Powers said.

“Some of these challenges can be met with clear-cut interventions; others may require more creative solutions, and Kraft Heinz assuredly cannot do everything quickly,” he said.

Landstar announces special dividend

For the third time in the past six years, Landstar System Inc. gave its shareholders a Christmas present by announcing a special dividend before the holidays.

The Jacksonville-based trucking company last week said its board of directors declared a one-time cash dividend of $2 a share payable in January. That’s on top of the company’s regular quarterly dividend of 18.5 cents a share.

Landstar also announced an increase in the number of shares it is authorized to buy under its stock repurchase program. When a company repurchases shares, it reduces the number of shares available for trading and makes the remaining outstanding shares more valuable.

“Landstar’s strong balance sheet and free cash flow generation enables us to continue to return value to our stockholders through a significant increase to our stock purchase program coupled with a special dividend,” CEO Jim Gattoni said in a news release. 

He said the company had $316 million in cash and short-term investments and $216 million available for borrowings under its senior credit facility at the end of the third quarter.

Landstar has done this before when it reached the end of year with cash available. It announced a $1 special dividend in December 2014 and a $1.50 one-time dividend in December 2017.

Analyst rates FIS at ‘equal weight’

Morgan Stanley analyst James Faucette on Dec. 16 initiated coverage on Fidelity National Information Services Inc., or FIS, at “equal weight,” seeing little additional upside to the stock after a recent big acquisition.

Faucette gave the same rating to FIS competitor Fiserv Inc. Both financial technology companies expanded with big acquisitions this year, as FIS acquired Worldpay Inc. and Fiserv bought First Data Corp.

“We see synergies from their WP/FDC acquisitions reflected in market expectations, while rising competitive investment in the space poses long-term headwinds and limits the compounding nature of their returns,” Faucette said in his report.

“Our conversations with buy-side investors since the deal announcements indicate nearly universal expectations of substantial upside to the deal synergies outlined by FIS and Fiserv,” he said.

“We think this upside is attainable, given management track records at both companies, and particularly strong execution at FIS’s Worldpay, but we think that upside magnitude may be limited.”

Faucette set a price target of $146 for FIS’ stock, which would be just a 6% gain from its recent trading price.

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