Founders’ 86% Stake in Heidi’s May Be Worth Only $156,000
The founders of Heidi’s Frogen Yozurt Shoppes are guaranteed only about $156,000 for their 86% stake in the troubled frozen-desert chain in a deal with Steve’s Homemade Ice Cream, Steve’s executives said Tuesday.
In a telephone interview, Steve’s Chairman Richard Smith and Vice Chairman Gary Stevens outlined their plans for Laguna Hills-based Heidi’s.
Among other things, they said they will offer Heidi’s franchisees the chance to sell Steve’s or Swensen’s ice cream in addition to Heidi’s yogurt. Steve’s bought the Swensen’s chain in 1987.
On Monday, Heidi’s two majority stockholders, President Heidi Miller and Executive Vice President Brian Pallas, said they had agreed to sell their 86% stake in the Laguna Hills-based yogurt chain in a stock swap with Steve’s.
The sale to Steve’s could end months of turmoil and trouble for the chain, which has total debt of $3.6 million, compared to total assets of $1.6 million, Stevens said.
Even so, Stevens and Smith said they are optimistic that Heidi’s will be turned around. “We’re here to make it work,” Smith said.
Stevens said Steve’s is considering the possibility of manufacturing and distributing yogurt mix for the Heidi’s chain. Heidi’s now buys its frozen dessert mix from Honeyhill Farms.
Steve’s also hopes to expand the product line in Heidi’s stores from just frozen yogurt to yogurt and Steve’s or Swensen’s ice cream.
“There’s an obvious need for additional sources of revenue to make stores work for franchisees,” Stevens said. “We think (offering both yogurt and ice cream) will generate incremental revenue . . . and make a better franchise system.”
In discussing the financial terms of the merger, Stevens said Miller and Pallas eventually could get up to $625,000 under the terms of the acquisition agreement.
The agreement calls for Miller and Pallas to swap almost 47 million shares of Heidi’s for up to 200,000 shares of Steve’s Homemade Ice Cream.
But the only thing that is “not conditional” is that Miller and Pallas will exchange their majority interest for 50,000 shares of Steve’s stock, said Stevens. At a recent trading price of $3.125, the stock would be worth $156,000.
Issuance of the remaining 150,000 shares depends on “our ability to settle out with certain creditors and Heidi’s achieving certain income levels over a 5-year period,” Stevens said.
The Steve’s executives confirmed that Miller and Pallas will remain as “consultants” to Steve’s for more than one year but declined to reveal details of their roles.
Pallas said Tuesday that the merger is conditional only upon the stock swap taking place. “We’re looking at a bright future for Heidi’s and its franchisees,” Pallas said.
