Harry & David Holdings sells for far less than the $252.9 million Wasserstein & Co. paid for the purveyor of Royal Riviera pears and Moose Munch in 2004.
A New York firm with a history of making the right moves at the right time is acquiring the Rogue Valley's largest manufacturing and agricultural enterprise in a $142.5 million deal.
Harry & David Holdings, the iconic gift and gourmet food company known the world over for its Royal Riviera Comice pears and Moose Munch snacks, will become part of florist and gift retailer 1-800-Flowers.com Inc.
The deal, announced Tuesday, includes Harry & David’s brands and websites as well as its South Pacific Highway headquarters, manufacturing and distribution facilities and orchards, a warehouse and distribution facility in Hebron, Ohio, along with 47 Harry & David retail stores located throughout the country. Harry & David’s current senior management team will remain with the business, which will become a wholly owned subsidiary of 1-800-Flowers.
The deal is expected to close in October.
Harry & David CEO Craig Johnson, who took the helm of the company when it emerged from Chapter 11 bankruptcy protection three years ago, referred questions to public relations firm Sard Verbinnen & Co. The New York firm served as Harry & David's buffer when Wasserstein & Co. took the company into bankruptcy.
A Sard Verbinnen representative said it's too early to discuss the implications of integration on the company's present leadership team, its manufacturing or call center operations.
"We are extremely pleased to be adding the iconic Harry & David name to our growing family of great gifting brands. Harry & David has steadily grown its top and bottom line for the past several years, with revenues reaching nearly $400 million in its most recent reported fiscal year," Jim McCann, CEO of 1-800-Flowers, said in a statement.
McCann said the combined company will produce annual revenue of more than $1 billion.
The price tag is about 43 percent less than the $252.9 million that Wasserstein & Co., along with another private-equity firm, Highfields Capital Management of Boston, paid Yamanouchi Pharmaceutical Co. 10 years ago.
"It's a very different world than 2004," said University of Oregon finance professor Stephen McKeon. "In 2004, the financial crisis hadn't occurred yet, and the macro-economy overall is not what it used to be. When you see a company that was generally worth x-amount and now worth x-minus-$100-million, it's possibly because investors don't have the same outlook for a firm they once did."
In Harry & David's case, competition, spending habits and the amount of disposable income come into play.
"At the end of the day, those things hit a company's income statement," he said.
McCann touted the acquisition as boosting his company's position as the leading destination for customers' celebratory and gifting occasions, and as significantly enhancing its offerings in the growing gourmet food and gift baskets market.
"We believe there are some significant synergies, in terms of both operating costs and revenue growth opportunities, that will further enhance the value of the combined businesses in both the near term and in the years to come," McCann said in a statement.
McKeon said the synergies McCann referenced make sense when companies acquire similar operations.
"If a company that is acquired continues operating as an independent wholly owned subsidiary, you may see very little change," McKeon said. "In that case, the synergies come more on the revenue side, rather than in cost cutting."
More typically, he said, companies find cost savings in eliminating duplicated operations such as accounting and legal departments. In 1-800-Flowers' case, Harry & David's voluminous customer files are potential cash cards.
"You're able to access existing customers without having to do anything on the cost side," McKeon said. "The presumption is that Harry & David has the same types of customers as 1-800-Flowers would want and have a predisposition toward the products it is now offering. They can now access those customers through a brand they're already engaged with."
In a statement issued through Business Wire on Tuesday morning, Johnson said the acquisition validates Harry & David's post-bankruptcy efforts.
"This announcement is a clear endorsement of the remarkable work that our talented team has put in over the past several years to rebuild the iconic Harry & David brand," Johnson said. "I am confident that by joining forces, we will benefit by gaining access to a robust infrastructure, distribution network, global presence and enhanced resources, which will enable us to continue to cultivate and grow the one-of-a-kind Harry & David brand."
Carle Place, N.Y.-based 1-800-Flowers.com said there was a lot to like about incorporating Harry & David into its empire, including a large customer database consisting of both consumers and corporate accounts; a website with significant and growing customer traffic; a unique collection of proprietary gift products and brands that engender strong customer loyalty; and a strong operational infrastructure consisting of geographically dispersed manufacturing, warehousing and distribution facilities.
While its logistics networks are cutting-edge, Harry & David has struggled off and on to fill its call center positions, sometimes looking to Eugene or elsewhere.
Given 1-800-Flowers' ability to fill that niche, there could be a seismic shift in the offing, but no hints were delivered Tuesday. In Jackson County, where unemployment still remains higher than national and state averages, even seasonal opportunities remain important.
"Call centers are not known for high wages," McKeon said. "But for people with part-time availability or in places with fairly high unemployment, where people are just looking to draw a paycheck, it can have real value."
Harry & David will join 1-800-Flowers' Fannie May, Cheryl's, Popcorn Factory, FruitBouquets, 1-800-Baskets.com and Stockyard.com lineup.
In a sense, it's back to the future for Harry & David, which first went public as Bear Creek Corp. in 1976 and was then acquired by RJ Reynolds Corp. in January 1984 for $74.1 million. Shaklee Corp acquired Bear Creek for $123 million in 1986 and in turn was purchased by Yamanouchi Pharmaceutical Co. Ltd of Japan in 1989.
Reach reporter Greg Stiles at 541-776-4463 or email@example.com. Follow him on Twitter at www.twitter.com/GregMTBusiness, on Facebook at https://www.facebook.com/greg.stiles.31, and read his blog at www.mailtribune.com/Economic Edge.