Future of Maxwell House remains uncertain

Owner Kraft Heinz takes $213 million noncash write-off on the value of the coffee brand; report suggests sale of Maxwell House is unlikely anytime soon.

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  • | 5:10 a.m. February 27, 2020
The Maxwell House plant at 735 E. Bay St. in Downtown Jacksonville employs about 200 workers.
The Maxwell House plant at 735 E. Bay St. in Downtown Jacksonville employs about 200 workers.
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A year after news reports surfaced that Kraft Heinz Corp. was trying to sell Maxwell House, the future of the iconic coffee brand remains uncertain as the parent company struggles financially.

When the food products giant reported fourth-quarter earnings two weeks ago, it included a $213 million noncash write-off on the value of the Maxwell House brand.

“The reduction in fair value of the Maxwell House trademark was driven by expectations of near-term net sales and profitability declines outlined in the 2020 annual operating plan in response to consumer shifts from mainstream coffee brands to premium coffee brands,” Kraft Heinz said in its annual report filed with the Securities and Exchange Commission.

The write-off reduced the carrying value of the Maxwell House brand to $823 million, it said.

CNBC first reported in February 2019 that Kraft Heinz was trying to sell the coffee brand. The company has not publicly commented on the future of Maxwell House.

The company’s plant in Downtown Jacksonville at 735 E. Bay St., which employs about 200 people, is the last remaining Maxwell House plant in the U.S.

The plant has been operating at that location since 1924.

After the year-end financial report, both Fitch Ratings and S&P Global Ratings downgraded Kraft Heinz’s credit ratings to junk bond level.

S&P’s report suggested a sale of Maxwell House is unlikely anytime soon.

“We believe management’s tone on the fourth quarter earnings call could signal a longer timeframe to negotiate and close potential divestitures,” S&P said.

“We cannot dismiss the possibility that Kraft Heinz will retain the majority of its portfolio if it cannot negotiate what it believes to be fair prices, especially in a scenario where it is seeking to sell out-of-favor brands.”

Foley ‘playbook’ boosts earnings at Dun & Bradstreet

A restaurant company controlled by Cannae Holdings Inc. filed for Chapter 11 bankruptcy reorganization last month. But the investment company spun off from Jacksonville-based Fidelity National Financial Inc. is touting its operation of Dun & Bradstreet Corp. as a success.

“Dun & Bradstreet, or D&B, has made remarkable progress in improving its operations in a very short period of time,” Cannae Chairman Bill Foley said Feb. 21 during the investment company’s quarterly conference call.

Cannae led an investment consortium that bought the business data firm for $6.9 billion last year.

Foley said under Cannae’s leadership, Dun & Bradstreet has achieved $208 million in annual cost savings and increased fourth-quarter earnings before interest, taxes, depreciation and amortization by about 18%.

“Dun & Bradstreet’s just another example of the application of the Bill Foley playbook that we’ve been telling the investors about,” Cannae CEO Rick Massey said in the conference call.

“In Dun & Bradstreet, Bill found the deal, put the balance sheet together, raised the capital, found the management team, installed them into their spots, found massive operating synergies and now Dun & Bradstreet is achieving growth,” he said.

Cannae last month said Dun & Bradstreet filed a confidential registration statement with the SEC for a potential initial public offering. That wasn’t addressed in the conference call.

Foley, who also is chairman of title insurance company Fidelity, has a long history of dealmaking in various industries.

One deal not working out so far is Cannae’s investment in several restaurant chains, which was made when the investment unit was part of Fidelity.

Cannae owns about 65% of American Blue Ribbon Holdings, operator of the Village Inn and Baker Square restaurant chains, which filed for Chapter 11 reorganization in January.

Cannae also controls the O’Charley’s and 99 Restaurant chains, but they are not impacted by the bankruptcy.

Massey said the Chapter 11 process is intended to improve operations and allow Cannae to “monetize” its investment in the restaurants.

“While this looked bad on the surface, we believe that it was a smart/strategic move in that it should allow for more time and cushion to reorganize/rationalize the footprint, free up cash flows and potentially improve its credit terms, all of which should put the Restaurant Group in a better position to be monetized,” Stephens Inc. analyst John Campbell said in a research note Monday.

Campbell maintains an “overweight (volatile)” rating on the stock.

“Over the near term, we would be investors in Cannae for the value creation events in the works within Cannae’s current portfolio, and we stay put over the long haul as we believe that the Company has a long and proven investment track record,” he said.

Analyst downgrades Black Knight on its valuation

Foley also is chairman of another Fidelity spinoff, Jacksonville-based mortgage technology company Black Knight Inc.

Black Knight invested in Dun & Bradstreet along with Cannae and in part because of the value of that investment, Keefe, Bruyette & Woods analyst Bose George last week raised his price target for Black Knight’s stock from $72 to $80.

But with the stock trading at $76.10 at the time of his report, George downgraded his rating on Black Knight from “outperform” to “market perform.”

“While we remain broadly positive on the business, we are downgrading the shares to Market Perform purely on valuation given just 5% upside to our new target,” George said in his report.

Buyout of Advanced Disposal nears end

Advanced Disposal Services last week reported adjusted fourth-quarter earnings of 8 cents a share, with revenue rising 1.4% to $400.5 million.

The Ponte Vedra-based waste services company agreed in April 2019 to a buyout by Waste Management Inc., and it looks like the deal will be completed about a year after it was signed.

Advanced Disposal has not commented publicly on its quarterly results or the pending merger since it was announced.

However, Waste Management CEO James Fish said during the company’s fourth-quarter conference call two weeks ago that the company expects to receive regulatory approvals by the end of March and close the deal soon after that.

Neither company has released specific details about how the merger will affect operations, including the Advanced Disposal headquarters in the Nocatee development in Ponte Vedra.

Advanced Disposal said in its annual report its lease for its headquarters office at 90 Fort Wade Road expires in 2021.

Antitrust regulators are expected to require divestitures of some operations, which is why the approval process has taken so long.

“We’ve received a high level of interest from other companies in acquiring any potential businesses we might be required to divest, and we expect to complete the sale of any required divestitures shortly after the closure of our purchase of ADS,” Fish said in the conference call, according to a transcript posted by Waste Management.

“Our integration team has been working hard preparing for this close, and the team is positioned to move quickly to integrate ADS operations and to achieve our targeted synergies,” he said.

ComSovereign revenue at $11.8M

ComSovereign Holding Corp., which merged with Jacksonville-based Drone Aviation Holding Corp. in November, said it expects to report pro forma 2019 revenue of $11.8 million.

Privately owned ComSovereign became public by merging with Drone Aviation and is now headquartered in Dallas.

Drone Aviation, which produced tethered aerial monitoring and communications platforms, reported revenue of $4.1 million in the first nine months of 2019.

ComSovereign, which owns several businesses in communications technology, said its pro forma data reflects results if the merger had been consummated Jan. 1, 2019.