Manage Sale and Wind Down of High Profile Chicago Company

Archibald Candy Corporation (Fannie May)

Chicago, Illinois

Challenge

Parent company of Fannie May Candies, Fanny Farmer Candies. Manufacturing, distribution and retail of candy. $172 million sales. $30 million debt


  • Company experienced several years revenue declines, margin erosion and operating losses
  • The company had gone through two bankruptcies in three years and accumulated excessive debt through failed acquisition attempts.
  • The Company had a single antiquated manufacturing facility in Chicago where production costs were well over industry averages.
  • The company owned many underperforming stores in remote geographies.
  • The company had strong union contracts in both the Chicago manufacturing plant as well as the retail operation making labor cost reductions very difficult to achieve.
  • Company was highly seasonal. About 70% of revenues were made within four holiday periods and significant working capital was needed April through October.

Solution

  • MorrisAnderson became CRO.
  • Create a plan to conduct an orderly sale and/or liquidation of the company to optimize the value of each asset.
  • Outsource product production to another manufacturer to allow for a going concern sale of Canadian subsidiary, Laura Secord.
  • Develop a liquidation timeline to optimize the sale of inventory consistent with the seasonality of the product to optimize return.
  • Find a lender to finance the wind down plan and eventual liquidation which would most likely be through a bankruptcy process.
  • Launch a sale process for US based assets that would bring a stalking horse bidder to the table at the correct time.
  • Reduce operating cost as much as possible to minimize losses while executing the plan; including layoffs, union concessions, closing of nonperforming retail stores and consolidation of the product line.
  • Closely coordinate all activities to optimize total recovery.

Results

  • Secured financing for sale/liquidation plan.
  • The inventory was 100% sold during the Christmas period and following January.
  • The announcement of closing created a “run” on the product and all inventory was sold at full retail. That gained an additional $5-7m for the estate over estimated recoveries.
  • Sold Canadian subsidiary, Laura Secord as a going concern business, based on having a proven source of continuing supply, at a price that exceeded original valuations by $8 million.
  • In the auction of US assets, the proceeds exceeded the stalking horse bid by more than double.