General Host Corp., owner of 75% of Orange County-based All American Gourmet Co., said Thursday that it has agreed to sell its interest in the frozen-dinner maker to Kraft Inc. for $296 million.
All American, which manufactures and markets three lines of frozen dinners under the "Budget Gourmet" label, reported sales of $195 million during the 12 months ended April 30. The company has 42 administrative and executive employees at its headquarters in the city of Orange, with the bulk of its 980 employees located in manufacturing facilities in Pittsburgh, Atlanta and Salt Lake City.
In addition to the acquisition of General Host's 12.3 million shares of All American, Kraft said it intends to offer to purchase the remaining 25% of the company for $74 million, or $18 per share.
General Host sold 25% of All American in a public offering in September, 1985, for $13 per share. A 2-for-1 stock split in 1986 increased the total number of shares to 16.4 million. All American closed at $14.125 per share Thursday in over-the-counter trading.
General Host is a diversified retailer based in Stamford, Conn. Its subsidiaries include the Hickory Farms chain of specialty food stores.
General Host said it will earn about $85 million from the transaction. The sale will also eliminate about $150 million in long-term debt from its balance sheet, General Host said.
All American, which markets regular and low-calorie frozen dinners, recently introduced a line of single-item side dishes. The company has attributed its success to its low-cost niche in the frozen-dinner market. It keeps costs down through automated production lines and inexpensive packaging.
All American President Ernest W. Townsend said Thursday that he views the acquisition by Kraft as the best alternative to operating All American as an independent company. General Host had announced its intention to sell its stake in the company last year.
"There are not very many small, fast-growing companies in the food industry that stay independent very long," Townsend said. "Kraft is offering us a way to continue to control our own destiny. They have a hands-off management style, a lot of resources and an understanding of the business. We're very pleased."
Townsend said All American's management team and its existing work force will remain intact under the terms of the acquisition agreement with Kraft.
The purchase agreement marks Kraft's fourth frozen food acquisition in the past three years. Last week, Kraft acquired the Anderson Clayton food unit of Quaker Oats.