Large investor in Solo Cup spurred acquisition

Large investor in Solo Cup spurred acquisition

URBANA — A large investor's interest in recouping its investment in Solo Cup Co. helped lead to the company's planned acquisition by Dart Container Corp.

Vestar Capital Partners took a stake in Solo eight years ago with an expectation of selling that stake when the time was right, said Solo spokeswoman Angie Gorman.

Apparently that time arrived.

On Wednesday, Solo agreed to be acquired by Dart in a transaction valued at $1 billion. Dart is paying $315 million for Solo and assuming about $700 million of Solo's debt.

The transaction, subject to regulatory approval, is expected to close by the third quarter of this year.

Dart sees value in the Solo name and is expected to keep it on certain products, Gorman said. Solo is probably best known for its bright red plastic party cups.

Solo Cup wasn't for sale last November when a Thomson Reuters story indicated the company was exploring a sale, Gorman said.

But the story sparked inquiries, and management began to explore strategic options, she said. Eventually, Solo determined its future might be best served by combining with another company.

"It's been a tough industry the last few years," Gorman said, noting the effects of the recession and the high costs of resins used in some Solo Cup products.

Solo Cup makes plastic cups, lids and containers at its 269,000-square-foot plant at 1505 E. Main St., U.

Some of the products are sold in grocery stores and mass retailers. Others are used by some of the nation's biggest fast-food chains.

The Urbana plant employs about 600, Gorman said. That includes 326 hourly non-union employees, 234 temporary workers, 18 warehouse workers and 33 salaried workers.

How the acquisition will affect the Urbana plant — and other Solo plants — has not been determined, Gorman said Thursday.

"The integration planning process is starting now, so it's premature to speculate on what Solo jobs may be eliminated," Gorman said.

She said Dart has indicated it places a high value on employee talent and will integrate as many Solo employees as possible into its operations.

A Dart official said the company will take time in deciding how to combine plants and equipment.

At this point in the process, Dart "can't guarantee anything and won't," in terms of facilities and jobs, said Jim Lammers, Dart's vice president of administration and general counsel.

Lammers said the two companies have some overlap in terms of product line. But he added, "For us to be a strong combined entity, we want and need a very large percentage of Solo's employees."

Solo has 13 manufacturing facilities and 10 distribution centers in the United States, Canada, Mexico, Panama and the United Kingdom.

Dart Container, on its website, lists 20 production facilities worldwide, with 13 of them in the United States. The others are in Canada, Mexico, Brazil, Argentina, the United Kingdom and Australia.

The Solo plant in Urbana uses the thermoforming process to mold plastic to specific shapes. According to a story in Plastic News last February, Solo Cup Co. ranked second nationally in thermoforming sales, behind Pactiv Foodservice and ahead of Dart Container.

Dart has thermoforming facilities in Leola, Pa.; Horse Cave, Ky.; Waxahachie, Texas; and Corona, Calif. Those are larger overall facilities than Urbana, Lammers said, but they're used not only for thermoforming, but also for making foam cups, one of Dart's key products.

Solo has a broader portfolio of products than Dart has, particularly when it comes to paper products, "environmentally preferable" products and consumer products, Gorman said.

"Environmentally preferable" products include those that are recyclable, have recycled content or are made of annually renewable materials that are compostible.

Dart does not have paper products, Gorman said, and Solo has a "much longer line" of consumer products — such as clear and color plastic cups, plates, bowls and cutlery — than Dart has.

Gorman said no dramatic changes affecting employees and locations are expected to be made until six to 12 months after the closing of the deal — and the deal closing isn't anticipated for one to six months.

Solo's salaried staff was informed of the deal within a couple hours after it was signed Wednesday, Gorman said.

Remaining employees received memos about the deal and were informed at meetings Wednesday and Thursday as their shifts came up.

According to Solo's most recent annual report — filed in March 2011 — the company employed about 6,700 worldwide as of Dec. 26, 2010, with about 5,500 of those in the United States.

Founded in 1936, Lake Forest-based Solo had $1.6 billion in net sales for the fiscal year that ended Dec. 26, 2010. It has had a plant in Urbana since 1962.

Dart Container, based in Mason, Mich., is a privately owned company founded by William A. Dart. Founded in 1960, it has 7,600 employees and 20 production facilities worldwide.

"Dart's leadership team has shown a high level of respect for what Solo has accomplished, and I believe we are putting the company in the right hands to succeed and grow going forward," said Robert M. Korzenski, Solo's CEO, in a release.

In the same release, Dart CEO Robert C. Dart said both companies have an extensive history in the industry and make complementary products.

Unlike publicly traded companies, where short-term results are important to investors, privately held Dart can make decisions and investments that are long term in nature, he said.

Dart said his company will take the time to integrate Solo in a "thoughtful, analytical manner to ensure lasting success."

Kevin Mundt, managing director for Vestar Capital Partners, said his company had "a rewarding and productive partnership" with Solo and its majority owner, the Hulseman family, the past eight years.

He called the combination "a very positive outcome for Solo, Dart, the Hulseman family and Vestar."

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