Hicks Muse Takes Vlasic Out of Pickle –

Hicks, Muse, Tate & Furst Inc. this month agreed to buy the North American assets of Vlasic Foods International, bumping an earlier deal Vlasic Foods had with H.J. Heinz out of the picture. The Dallas-based buyout firm will buy the businesses, which include Swanson frozen foods, Open Pit barbecue sauce, and Vlasic pickles and condiments for $370 million plus warrants to purchase 15% of the common stock of the acquiring entity and additional consideration.

The Heinz deal would have given Vlasic between $174 million and $179 million for the Open Pit and Vlasic businesses only.

The deal is pending the approval of the U.S. Bankruptcy Court, although the company is not expecting any obstacles in the court approval. But the deal will also have to withstand competing bids in a court-supervised auction process. The hearing date is set for May 9 and all competing bids have to be received by May 3.

Vlasic Foods has been discontinuing and divesting businesses over the last three years in order to recover from the debt acquired with the company’s spin-off from Campbell Soup Co. in 1998. The three businesses being sold to Hicks Muse, which have combined sales of $750 million, represent the last of Vlasic Foods’ assets to be sold.

In February 2000, the company retained Lazard Freres & Co. to look into strategic solutions for Vlasic Foods, possibly in the form of divestitures, joint manufacturing or marketing ventures, a merger or a recapitalization. Lazard remains actively involved in the company’s resturcturing, in addition to Goldin Associates, a New York-based firm retained to oversee the entire initiative.

Dig Into the Penny Jar

The proceeds from the sale will be used to pay off Vlasic Foods’ senior lenders in full and to make a substantial distribution to the company’s bondholders and other unsecured creditors, said David Pauker, a managing director at Goldin Associates, in a statement.

Upon completion of the deal, the company plans to move ahead with its turnaround plans.

“I think it’s fair to say that the next thing for Vlasic would be that it will begin to actually effect the turnaround that it never had the opportunity to do when it was immediately spun off under Campbell Soup,” said a spokesperson from Vlasic Foods. “It’s going to get a new fresh start without being saddled with the amount of debt that it was intially saddled with, and it was that that prohibited the company from investing behind its brands.”

Vlasic Foods has been told that the current management team will remain in place and will be teamed with Hicks Muse’s management, said the spokesperson.

The buyout firm plans to build Vlasic Foods as a platform company, which will seek add-ons.

“You take the track record that [Hick Muse has], . . . and combine that with the team that’s in place here and I think that’s a pretty good recipe for success,” the spokesperson said.

Hicks Muse declined to comment for this story.

In addition to these three businesses, Vlasic Foods completed the sale of its U.K. businesses, Freshbake frozen foods and SonA canned and jarred fruits, vegetables and beans business, to separate parties three weeks ago. Prior to that, the company sold its Swift-Armour Argentine beef business, its German Kattus gourmet foods distribution business and its fresh mushroom business.