Jarden Corp., formerly known as Alltrista Corp., has won a bid over a former board member to buy the assets of bankrupt Diamond Brands Operating Corp., one of the largest makers of retail plastic cutlery in North America.
In a Nov. 19 auction, Rye. N.Y.-based Jarden agreed to purchase Diamond's three plants, including a large complex in East Wilton, Maine, that injection molds kitchen cutlery and clothespins. Diamond, based in Cloquet, Minn., also is a leading North American producer of wood toothpicks and matches and distributes a line of plastic straws.
``It fits with our idea of building a portfolio of domestic consumable brands with a high market share in niche markets,'' Martin Franklin, Jarden chairman and chief executive officer, said in a Nov. 20 telephone interview. ``The products we have are big fish in small ponds.''
Jarden, which changed its name in May from Alltrista, is moving in an injection molding direction. In April the company bought San Francisco-based Tilia International Inc., a maker of vacuum-packaging products, and Jarden owns molder Unimark Plastics Co.
Jarden paid about $90 million to buy Diamond's assets, about $84 million of which will be used to retire secured bank debt and pay off some creditors. Buried by high debt and an underperforming candle business that eventually was divested, Diamond entered Chapter 11 bankruptcy protection in May 2001.
The company had been owned by investment group Seaver Kent/TPG Partners, based in Menlo Park, Calif. The group took the company private in 1998, after securing $105 million in bank loans and issuing $145 million in senior subordinated notes.
As sales grew to more than $100 million annually the company was awash in debt, partly from the reorganization of finances, said William Olson, Diamond's vice president of finance. A heavy rise in polystyrene prices in 2000 for the cutlery business did not help, he said.
``We had to get some cash to pay off the bank debt,'' Olson said. ``The only way to do it was to sell the company. We assumed all along that somebody new had to own us.''
Four potential bidders came forward during an auction held by the U.S. Bankruptcy Court in Wilmington, Del. Bidders included Minneapolis-based equity house Hunter Keith Industries Inc., led by former Diamond board director Andrew Hunter.
Two other bidders, Miami-based Trump Group and Black Diamond Capital Partners of Park City, Utah, did not make a serious effort to buy Diamond Brands, according to several sources close to the sale. Trump Group is not related to financier Donald Trump.
The acquisition by Jarden fits nicely into Diamond's growing portfolio of consumable products, said equity analyst Charles Strauzer of CJS Securities in White Plains, N.Y.
``Jarden can strip out the redundant costs and hit the ground running from day one,'' Strauzer said. ``With its other businesses, it can create a dominant player in consumables. It makes sense for them to layer plastic cutlery and other products onto Jarden's distribution network.''
The Tilia acquisition gave the company packaging for such products as razor blades, an item bought frequently by consumers, said Joseph Altobello of New York-based CIBC World Markets Corp.
The Diamond Brands purchase brings similar benefits, he said.
``It's a decent cash-flow business that they bought at a reasonable price,'' Altobello said. ``New management at Jarden is doing very well, even though they are still small and off the radar screen for some people.''
Not including the Diamond purchase, scheduled to close in late January, Jarden's sales are projected to approach $420 million in 2003, Strauzer said. This year company sales are slightly above $400 million, Franklin said.
The sale still needs final approval by the court and a secured creditors committee representing several banks. Those items appear to be formalities, Franklin said.
Diamond will record close to $110 million in sales this year, Olson said. The company declined to break out figures for its cutlery business, which it entered in 1995 by purchasing Forster Holdings Inc. Figures for the 1997 calendar year, the most recent figures available, show that business recording about $30 million in sales. The cutlery business has represented the single largest portion of Diamond's sales in the 1990s, where figures are available.
Diamond also has a plant in Strong, Maine, and one in Cloquet, where it makes toothpicks, matches and sticks for ice cream and corn dogs. It also has warehouse operations in Independence, Mo. The company employs 600. In a Nov. 19 auction, Rye. N.Y.-based Jarden agreed to purchase Diamond's three plants, including a large complex in East Wilton, Maine, that injection molds kitchen cutlery and clothespins.
Franklin said he intends to operate the Diamond facilities as they exist today. The company also will look for more purchases in consumer products, he said.
``We're hoping to grow that business, not shrink it,'' Franklin said. ``It's a good fit, but it hasn't stopped us from looking at other opportunities.''