Steve's Homemade Ice Cream Inc. has completed its purchase of the majority interest in Laguna Hills-based Heidi's Frogen Yozurt Shoppes, a Steve's executive said Wednesday.
The agreement adds about 90 Heidi's yogurt stores to Steve's expanding empire of more than 435 mostly franchised ice cream parlors, including the Swensen's Ice Cream chain. In California, there are two Steve's shops (one of them in Santa Ana) and about 90 Swensen's.
The deal, first struck in November, was completed Friday when 86% of Heidi's stock was transferred to the chain in exchange for 50,000 shares of Steve's common stock. The Heidi's stock represents almost 47 million shares, or all of the stock owned by co-founders Heidi Miller and Brian Pallas.
Steve's common stock has recently been trading at about $3.125. Miller's and Pallas' new stock therefore is worth about $156,000.
Gary Stevens, vice chairman of the board of Steve's, outlined aggressive expansion plans for both Steve's and Heidi's and predicted that the beleaguered yogurt company will become profitable "within 90 to 180 days."
All Heidi's franchisees will be offered the "opportunity" to sell Steve's ice cream under a master license agreement, without paying the standard $25,000 franchise fee, Stevens said.
"The two concepts together make sense," said Stevens, who envisions "combination trademark stores" that use both the Steve's or Swensen's name, as well as the Heidi's logo.
Steve's plans to move Heidi's corporate headquarters to Andover, Mass., site of a large office for Steve's and headquarters for the Swensen's chain. Steve's, which is headquartered in Bloomfield, N.J., will eventually install its own management team at Heidi's.
Miller and Pallas will no longer have management roles and instead will remain as "consultants," mostly involved in advertising and promotion, Stevens said. Miller and Pallas could not be reached for comment Wednesday.
In buying Heidi's, Steve's is not assuming the yogurt company's debts, with the possible exception of $50,000, Stevens said. He estimated Heidi's total debts to be $3.6 million and its assets to be about $1.6 million.
The agreement leaves far from settled what will happen with pending lawsuits against Heidi's, as well as creditors' claims and former employees' claims for back wages. Moreover, at least half a dozen franchisees have filed claims against Heidi's with the American Arbitration Assn., alleging mismanagement and fraud. Miller and Pallas have denied any wrongdoing.
Stevens said Heidi's will try to settle the various claims.
Heidi's also still must contend with a federal petition filed earlier this month seeking to put Heidi's into involuntary bankruptcy. A hearing on whether to dismiss that petition is scheduled for March 1 in U.S. Bankruptcy Court in Santa Ana.
In addition to the 50,000 shares of Steve's stock, Miller and Pallas eventually could get another 150,000 shares under the terms of the acquisition agreement based on Heidi's earnings over a 5-year period and the yogurt chain's ability to settle creditors' claims, Stevens said.
Steve's earnings for the 9 months ended Oct. 1 were $1.1 million on sales of $14.9 million, contrasted with a $273,000 loss the comparable period last year.