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eNews from Monday, December 7, 2009

Private Equity Firm Buys Balance Bar Brand From Kraft Foods

Connecticut Post (Bridgeport) -- December 6, 2009 -- Greenwich-based private equity firm Brynwood Partners LP continues gobbling up properties in the packaged food industry with its recent acquisition of the Balance Bar Co. from Kraft Foods.

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The purchase, announced last week, marks the firm's first investment from its sixth fund, Brynwood Partners VI, said Henk Hartong III, senior managing partner with Brynwood Partners.

"Brynwood has an established history of buying orphan brands from large companies," said Hartong, who will serve as Balance Bar's chairman. "We really like the brand because it has a tremendous following at the consumer and retailer levels."

Financial terms of the transaction were not disclosed.

Brynwood Partners VI plans to build on the pioneering effort by Balance Bar, which Kraft owned for 10 years, to create an energy bar that is 40 percent carbohydrates, 30 percent fat and 30 percent protein, Hartong said.

"We're going to focus on what made the brand so special, which is balance, nutrition and great taste," he said.

Brynwood Partners VI, which bought the Balance Bar brand and inventory, is looking to move Balance Bar Co. from Kraft Foods' headquarters in Northfield, Ill., to Westchester County in the very near future, Hartong said.

Balance Bar's five varieties of energy bars will continue to be made at plants in southern California and Quebec, Hartong said.

Brynwood may do well with Balance Bar because the firm's smaller size in comparison with Kraft

Foods will allow it to focus more energy and resources on the energy bar company and its products, said Frank Dell, president of Dellmart and Co. of Stamford, a management consulting firm for the food and consumer products industries.

Founded in 1984, Brynwood Partners, which launched the Brynwood VI fund in October 2008, makes control investments in lower middle-market companies targeting the consumer products, light industrial manufacturing, specialty retailing and business service sectors. The company has made investments in 22 portfolio firms, including several specialty food companies such as Lincoln Snacks, DeMet's Candy Co. and Richelieu Foods.

In 2007, Brynwood Partners V bought the Turtles brand from Nestle USA Inc. and merged it with Signature Snacks Co. to form Stamford-based DeMet's Candy. As part of the merger, Brynwood Partners V acquired Turtles' 280,000-square-foot production facility for the chocolate, caramel and nut-filled confections in Toronto, Canada.

Flipz, the yogurt-covered pretzel line that Brynwood bought from Nestle in 2003, is made at a plant in Mohnton, Pa.

Brynwood Partners sold Lincoln Snacks, which makes Fiddle Faddle and Poppycock, in 2004 to Chicago-based private equity firm Willis Stein and Partners.

Brynwood made news recently with the sale of Stella D'Oro Biscuit Co. in Bronx, N.Y., to Lance Inc., a Charlotte, N.C.-based snack food company whose products include Cape Cod Potato Chips and Archway Cookies.

About 135 workers for Stella D'Oro, which Brynwood Partners bought from Kraft Foods in 2006, picketed in front of Brynwood Partners' Greenwich office on Sound Shore Drive in May after negotiations on a new contract hit an impasse. Employees said Brynwood demanded that Stella D'Oro's unionized employees agree to salary givebacks and that the company wanted to reduce the number of holidays and sick days. Brynwood said the sale and subsequent closure of the Stella D'Oro Bronx plant was because of its high production costs.

Brynwood Partners still owns Richelieu Foods, a leading supplier of private-label salad dressings and frozen pizza.

Balance Bar was a small business for Kraft Foods that was "not financially material" to Kraft, said Kraft Foods spokesman Michael Mitchell.

"Balance is a great brand that has found a wonderful new home at Brynwood Partners," he said.

Brands and products manufactured by Kraft Foods, the world's second largest food company, include Kraft cheeses, dinners and dressings, Maxwell House coffees, Oscar Meyer meats, and Philadelphia cream cheeses.

This year's third-quarter revenues for the company, which in 2008 posted annual revenues of $42 billion and recently made a $16.2 billion bid for Cadbury Plc., declined 5.7 percent to $9.8 billion from $10.4 billion for the same period last year. Third-quarter operating income increased 38.7 percent to $1.4 billion from $1 billion.

Kraft's sale of Balance Bar Co. is part of its restructuring efforts over the past few years since Irene Rosenfeld became chief executive officer in 2006, said Erin Smith, a securities analyst with Argus Research in New York City.

"They've been looking to sell a lot of underperforming brands," she said.

Balance Bar Co., which was part of Kraft Foods' snacks division, was outside Kraft Foods' greater focus on dairy and pizza products, Smith said.

"It doesn't really fit in their core of products," she said.

Author: By Michael C. Juliano, Connecticut Post, Bridgeport

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