Ailing Winn Says It May Seek Buyer for Knudsen Dairy Unit
Winn Enterprises said Wednesday that it may seek a buyer for its Knudsen Foods unit, the largest dairy in the West.
Ted D. Nelson, Winn chairman, said the financially troubled Los Angeles company has hired two investment banking firms, First Boston and Allen & Co., to help it “assess . . . recapitalization alternatives, including the possibility of selling some or all of our operations.” Besides Knudsen, Winn’s only operation is a small savings and loan in Utah.
As previously reported, Winn--the leading seller of milk, cottage cheese and buttermilk in California--was considering the sale of at least one-third of Knudsen’s dairy properties to help reduce a crushing $266.2-million debt. Winn, controlled by Nelson and his two half-brothers, Dee R. and Lee R. Bangerter, took on most of that debt when it acquired Knudsen in 1983 and San Francisco-based Foremost Dairies in 1985.
Dairy industry sources were doubtful Wednesday that Winn can recover the $74.8 million that it paid for Knudsen and the $50.1 million that it paid for Foremost through sales of the dairy operations. Winn, in fact, sold many of the former Knudsen plants to help finance the initial purchase. It operates those facilities under sale-leaseback agreements.
Dairymen’s Cooperative Creamery, the largest dairy cooperative in the state, said it is interested in buying some of Knudsen’s fluid milk, cottage cheese and ice cream plants with an out-of-state cooperative that it declined to identify. George M. DeMedeiros, chief executive of Dairymen’s Cooperative, based in Tulare, said it hasn’t yet approached Knudsen. Dairymen’s Cooperative Creamery had sales of $350 million last year and supplies Lucky, Safeway, Pillsbury, General Foods and Kraft.
In Northbrook, Ill., a spokesman for Kraft, the dairy unit of Dart & Kraft, declined to say whether it is interested in any Knudsen properties. Although Kraft has withdrawn from the fluid milk market, it has recently entered the California ice cream market with its Breyers brand and its purchase of Frusen Gladje.
Kenneth J. Douglas, chairman and chief executive of Dean Foods, a Franklin Park, Ill., milk company thought to be a candidate for some Knudsen properties, said the milk processor hadn’t had any discussions with Knudsen management. Douglas said the company hasn’t decided whether to look at Knudsen’s properties.
In its March 31, 1986, quarterly report, Winn acknowledged that it had cash flow problems. The report said that since at least September, Winn had been in violation of its loan agreements with its principal bank creditor, Citicorp Industrial Credit Bank. The quarterly report also said Knudsen was several months behind on its payments to the former owners of Foremost.
Since its merger with Foremost last June, Knudsen has been bedeviled with production problems and equipment breakdowns at some of its plants. The company has acknowledged that it lost $35 million in sales since the merger due to problems earlier this year with late deliveries and a decision to phase out the Foremost name in Northern California.
