Another Hunt-Wesson Sale May Be at Hand

Many of the employees at Hunt-Wesson, the $1-billion Fullerton food-processing division of Beatrice Co., have been through this drill several times before. The company, which has changed hands four times in the past four years, is on the block again.

It has officially been for sale for five months now, and recent developments make it appear that a new owner--likely to be a European food industry giant--is in the offing.

The delay in finding a buyer apparently has been Beatrice Chairman Donald Kelly’s insistence on selling all four of his firm’s food divisions as a package--a $4.5-billion package.

Finding a single buyer at the price is a difficult task in today’s tumultuous international market, industry analysts say.

Kelly, however, made a rare trip to Hunt’s headquarters this week, and while company officials will not say what he talked to them about, analysts who follow the firm say a pending sale agreement appears to have been at least part of the agenda.

He reportedly flew to the company’s Tropicana Products division in Bradenton, Fla., for similar talks Thursday.

Beatrice announced in September that it was seeking to sell Hunt-Wesson and three smaller domestic food-products divisions: Tropicana, Swift-Eckrich of Oak Brook, Ill., and Beatrice Cheese of New Berlin, Wis.

Hunt-Wesson, the largest of the four divisions, has more than 10,000 employees in the United States and Canada, including 1,500 at its headquarters and 1,000 workers in manufacturing and canning operations in three other Orange County facilities. The division’s products include Wesson cooking oils, Hunt’s tomato products, Peter Pan peanut butter and Orville Redenbacher popcorn.

The division reportedly is a profitable one--which may account for its rapid turnover in recent years. It first changed hands when its original corporate parent, Norton Simon Industries, was purchased by Chicago-based Esmark in 1983. A year later, Esmark was acquired by Beatrice. And in 1986, Beatrice changed ownership when it was taken private in a leveraged buyout led by the investment group of Kohlberg Kravis Roberts & Co.

Since then, about half of Beatrice’s assets have been sold, bringing premium prices, analysts said.

Food giants Nestle S.A. in Switzerland and Unilever N.V. in the Netherlands are the top prospects for acquiring Beatrice’s food divisions, according to Rosemary Sagar, a European companies analyst in New York for Baring Securities.

She said that both companies are sitting on loads of cash and are interested in increasing their already substantial U.S. presence. Sagar said that Nestle has nearly $3 billion available for a possible acquisition.

But agreeing to a sale price for the divisions of privately held Beatrice has been difficult.

Valuing public as well as private U.S. companies has been especially hard because of last October’s stock market crash and the continuing market volatility.

“What stocks are traded at in the markets typically can be used to determine what almost any company is worth. But not anymore,” she said.

Also, wide swings in the value of the dollar have made negotiations between U.S. and foreign companies even more laborious.

In Chicago, Beatrice Vice President Lizabeth Sode said Thursday that “Kelly hasn’t sat across the table with anyone who thought the price was right.”

Kelly’s insistence on only selling the divisions as a package has also slowed down a sale, according to Ron Morrow, a food industry analyst at the brokerage firm of Smith Barney, Harris Upham & Co. in New York.

“You’re talking about a lot of money, and few companies want everything that Beatrice has,” Morrow said. He said that while some of Beatrice’s divisions are well-run, Kelly’s insistence on an all-or-none sale might indicate that not all of the companies are doing well, Morrow said.

If a deal isn’t reached soon, Morrow said, Kelly might have to sell the divisions separately. For instance, Quaker Oats Co. has publicly expressed interest in the Tropicana division but not the others.

And the Beatrice food divisions aren’t the only food companies on the block. Sagar said that the food products industry, which has been abuzz with takeover activity in recent years, is still in a consolidation period and that many companies can be purchased for good prices.

Sode said a sale of the Beatrice divisions might also be delayed by the pending sale of another company Kelly heads. E-II, a firm that Beatrice spun off in a public offering last year, has agreed to be taken over by American Brands, which has made a tender offer for E-II shares. Sode said the offer, which expires Feb. 19, is expected to win acceptance by E-II shareholders.