Erly Industries to Acquire TreeSweet for $21 Million
Erly Industries of Los Angeles will acquire bankrupt TreeSweet Cos., producer of Awake and Orange Plus beverages, for $21.5 million under a reorganization plan filed in U.S. Bankruptcy Court in Houston, where TreeSweet has its headquarters.
The proposed acquisition, negotiated for months while an Erly Industries management team guided troubled TreeSweet, is only the latest expansion move by Erly, a leading California rice processor and wine maker.
In May, Erly bought a 48% stake in American Rice Inc. of Houston. It already owns Comet Rice, California’s third-largest rice miller.
Last year, it snapped up the old Italian Swiss Colony winery, merging it with its bulk-wine business and renaming the combined San Francisco-based operation Beverage Source.
As part of the TreeSweet deal, Erly is also acquiring some Florida citrus operations from Kraft Inc. in a $11-million deal expected to be completed this month. The Kraft property would be merged with TreeSweet’s remaining juice businesses if creditors accept the reorganization plan.
TreeSweet creditors began seeking a solution to its financial problems in early 1987, said Marc Beilenson, a Los Angeles attorney representing TreeSweet. About 18 months ago, they approached Erly Industries, which agreed to provide a new management team, headed by Fran E. Graham as president and chief executive, while negotiating the acquisition as part of a settlement.
A federal bankruptcy court judge in Houston on Monday approved putting the plan to a vote of TreeSweet creditors. The largest are Bank of America and Di Giorgio Corp., both based in San Francisco. Results are to be announced Nov. 22, said Beilenson.
A majority of creditors whose combined holdings represent two-thirds of TreeSweet’s $85 million in debt must approve the plan to prevent the company’s liquidation.
Actually 4 Companies
Beilenson disclosed in an interview that the court last month ordered TreeSweet to close its juice-processing plant in Santa Ana as a cost-cutting move. That order wiped out the last 51 jobs at the plant.
“The difference between the productivity of the plant and (the cost) of having someone else co-pack the product was very large,” Beilenson explained. “The court determined that (closure) was necessary to keep the company viable.”
TreeSweet actually is composed of four separate companies. These were acquired in a leveraged buyout from Di Giorgio in 1984 by Texas investors Clinton E. Owens and E. Trine Starnes. The next year the Texans bought Awake and Orange Plus from General Foods for $24 million in cash.
Shortly after, business began to sour as competition intensified in the frozen fruit concentrate business. In addition, the new owners were unsuccessful in launching low-calorie and vending-machine versions of TreeSweet beverages, said Beilenson, an attorney with the Los Angeles law firm of Buchalter, Nemer, Fields & Younger.
Under the reorganization plan, some creditors would get a share of company profits over the next few years, while most unsecured creditors would be paid 20 cents on the dollar.
Bank of America, which financed the leveraged buyout and is owed $27 million, would get $7 million in cash and 2.5% of the profits of Erly Citrus Group over five years. Di Giorgio, owed $34.9 million, will receive $3.5 million in cash, 12.5% of Erly Citrus profits for five years, $2.1 million in notes and a $1.5-million note from Starnes.
