Buyout of Orchids Paper Spells Success to Executive Group
When Marjorie Jordan started working as a napkin packer for Orchids Paper Products in Los Angeles in 1959, she was making $1.19 an hour.
Jordan has come a long way since then. Today, she is co-owner of Orchids, a $150-million company now based in La Palma.
“I always felt like it was my company, but I never thought in my wildest dreams that one day it would be,” Jordan said. “I guess the American dream does come true every once in a while.”
Deal Signed Last Month
Jordan, 53, and six other Orchids executives signed a deal last month to acquire the company in a $50-million, leveraged buyout from APL Corp., a $1.2-billion conglomerate headquartered in Miami.
The seven include the president and six vice presidents of Orchids: President Orville Simms Jr. and Vice Presidents Jordan, Dennis Goldberg, Tom Hill, Manuel Alvarez, Hal Purdy and Chris Rimington.
Orchids is among the top 10 producers of private label-paper products, including bath and facial tissue, towels and napkins. Most of Orchids products are sold under generic labels in supermarket chains such as Ralphs, Vons and Lucky.
The proposal to purchase Orchids originated with Simms, who had become tired of wrestling with APL bureaucracy every time a new piece of equipment was needed. He had shared his frustration with an investment banker in New York, who, in turn, suggested the buyout.
“He said, ‘Why don’t you just buy the company. It’s easy enough; everyone is doing it,’ ” Goldberg recalled.
Found Solid Support
When Simms took the idea to his six vice presidents, he found overwhelming support, according to Jordan and Goldberg.
“It sounded like that could be the solution to the problems we were having,” Jordan said. “It used to take forever and a day to get something done.”
It took the group 2 years and many 7-day workweeks to put together the proposal. “I have a couple of more gray hairs now and I think I need bifocals,” Goldberg said in measuring the task.
APL’s response to their idea was less than enthusiastic.
“APL said the timing was not right. But we kept pursuing it,” Goldberg said. “We never lost hope. We believed enough in the company that we believed we could sell it to the bank. We never had any doubt that we could do a hell of a lot better job.”
Goldberg said that the buyout has boosted the morale of Orchid’s 800 employees.
“There has been a noticeable difference,” Goldberg said. “We’ve been able to take care of insurance payments and pensions faster. I mean, in the past, if someone’s kid was taken to the hospital and there were problems (with insurance), that would spread through the plant like wildfire.”
A Growing Trend
Purchasing by means of a leveraged buyout has been a growing trend for about 5 years, according to Art Perrone, vice chairman at Geneva Cos., a mergers and acquisition company. Leveraged buyouts are purchases made with mostly borrowed money, to be paid back with either profits or company assests.
“Financial institutions have become more aggressive in loaning money,” Perrone said. “They now base loans on current and future cash flows. In other words, people can borrow with no equity. There is basically a tremendous amount of money out there looking for a home.”
According to Goldberg, the Orchids buyout was made with a 5-year loan from CIT, a division of Manufacturers Hanover. Jordan said the loan will be paid back with earnings and not with parts of the company.
Although Jordan is now a co-owner of Orchids, she said she has not lost touch with her roots on the production line, where workers still inspect the napkins, stuff them in a sack and send them on their way.
“I’m still part of their ranks,” Jordan said. “The only difference is that we used to talk about our kids, and now we’re talking about our grandkids.”
