rom their earliest days, merchants of debt—“private equity shops” in the current parlance—have been attracted to the food business. Who can forget KKR’s $31 billion battle over RJR Nabisco in 1988? A few years later, Borden, maker of everything from condensed milk to Elmer’s Glue, was consumed by an ill-fated leveraged buyout.
The only way out from under its debt cloud, according to Acosta’s management, was a quick bankruptcy filing that would allow it to emerge from the process in January effectively wiping clean its balance sheet and allowing its remaining employees to keep working. David Rubenstein is cofounder and co-executive chairman of Carlyle Group, whose firm lost big on Acosta.From the 1930s to the 1970s family-owned Acosta remained firmly rooted in Jacksonville. According to company history, Acosta had $500,000 in revenues and just 26 employees in 1974. It was then that a former Procter & Gamble salesman named Delmar Dallas took over Acosta.
Then, in 2003 private equity investors came knocking on Acosta’s door. Boston-based Berkshire Partners, seeing the predictable cash flows churned out in this noncyclical business, acquired a minority stake in the business. The Acosta bankruptcy is a cautionary tale for today’s frothy private equity boom. A quarter of private equity deals involve PE firms on both sides of the transaction.
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