Ontario, Calif. — Amid ownership issues and new litigation, Balda AG of Bad Oeynhausen, Germany, is investing significantly for new equipment, physical improvements and relocations in its Southern California operations.
“We are excited about the developments and have had good growth in the last year,” said Christoph Klaus, CEO of the firm's Balda C. Brewer Inc. unit.
For the fiscal year ended June 30, Balda AG reported total sales in its American operations of 47.9 million euros ($53 million) vs. 38.7 million euros ($52.2 million) for the previous year.
Balda is in the process of consolidating four California manufacturing sites into two, in Ontario and Oceanside, with improved capabilities.
“These changes are all parts of our growth strategy,” Klaus said. “We will achieve economies of scale and economics of scope. We might take two to three years to fill up the huge factory [in Ontario], but it is all part of a clear strategic picture.”
Production in Ontario should begin in mid-2016.
Ownership, legal issues
In the ownership arena, a decision is pending on a change for control of parent company Balda AG. But, according to Klaus, the change should not impact the California plans.
Balda shareholders recently approved a deal to sell the company to Heitkamp & Thumann KG of Düsseldorf, Germany, for 74 million euros ($79 million), but Balda management and its supervisory board have held off on final acceptance, pending a possibly higher bid from another suitor.
In a late move, pharmaceutical-sector supplier Stevanato Group SpA of Piombino Dese, Italy, submitted a non-binding bid of 80 million euros ($85 million) for all Balda operations. Balda has given Stevanato until Dec. 14 to decide on whether to make a binding bid.
Meanwhile, Balda is still dealing with legal issues with the previous owner of the Balda operations in California.
Balda bought the U.S. plants in 2013 from the Brewer family, including brothers Chuck Brewer III and Michael Brewer, who were CEO and chief operating officer, respectively. They were terminated in January 2015 after a dispute about a $5 million bonus they expected to receive from the sale.
On Nov. 16, five Brewer family members and a related trust filed a lawsuit in a Santa Ana, Calif., court seeking $5 million in damages from a range of Balda entities and individuals.
“The Brewers have never been through a merger or acquisition before,” said their lawyer, Rod Pacheco. “All of this is new for them, and they are being defrauded.”
The Brewer filing includes a 46-page complaint that lists 16 claims including breach of contract, intentional and negligent misrepresentation, fraudulent concealment and financial elder abuse.
The Superior Court of Orange County assigned the case to Judge Randall Sherman, who on Nov. 25 accepted a $5-million bond that Balda voluntarily posted and that a SureTec Financial Corp. unit issued. The judge denied a temporary restraining order that the Brewers had requested. Sherman scheduled hearings on a possible preliminary injunction Dec. 17 and a proposed motion to compel arbitration Jan. 28 with that court date subsequently moved to Jan. 14.
The Brewers believe any Balda sale could move the company's funds outside their legal reach in the United States and require them to pursue remedies in a more-difficult-to-access jurisdiction in a European court.
Of note, the new external sign at the Ontario facility says “Balda” prominently and omits any mention of the “C. Brewer” identify.
Making the moves