by Timothy McQuiston, Vermont Business Magazine What sounded like a promising result for Koffee Kup Bakery in Burlington and Vermont Bread in Brattleboro is now in question. Flowers Foods, Inc (NYSE: FLO), producer of Nature's Own, Dave's Killer Bread, Wonder, Canyon Bakehouse, Tastykake, and other bakery foods, announced Monday that it has acquired the assets of Koffee Kup Bakery, Inc (KKB) from the court-appointed receiver of the assets. Financial terms of the transaction were not disclosed.
Meanwhile, the presumed preferred buyers, the Hyslops from Sussex, New Brunswick, were set to re-start the business on Tuesday and were as surprised as everyone else, including Governor Scott, that a new buyer was announced in court Monday.
The acquisition includes three closed bakeries located in Burlington and Brattleboro, Vermont and North Grosvenor Dale, Connecticut, and the Koffee Kup Bakery and Vermont Bread Company brands. According to the Brattleboro Reformer, Flowers has no immediate plans to reopen the plants, but former employees will get back pay. When the plant closed, the receiver had clawed back some of the pending compensation. But as of now, the jobs will not be coming back.
Just at the end of May, Blair and Rosalyn Hyslop, from Sussex, New Brunswick, who are the owners of Mrs. Dunster’s Bakery, announced they would acquire the brands and reopen the two Vermont plants and continue the iconic brands.
They were also in line to receive a Vermont Employment Growth Incentive award of $1.8 million. To receive the money they would need to reach intended employment goals. Unlike the two other suitors, Flowers did not apply for a VEGI award.
Nevertheless, according to the Reformer, principal creditor KeyBank got a more substantial offer from Flowers to help offset the debt.
KeyBank's Senior Communications Manager Karen Crane told VBM in an email: "KeyBank is not at liberty to make a comment. The terms of the transaction were arranged between the receiver and the purchaser and we are unable to discuss details of client accounts or transactions."
Governor Phil Scott said Tuesday that he also was taken off guard by the sudden change of a potential owner. He said his office was trying to get more details. However, he added that the receiver is obligated to get the best deal for the creditors.
According to the Vermont Department of Labor, 156 workers lost their jobs at Koffee Kup’s Riverside Avenue bakery on Riverside Avenue in Burlington and 91 workers lost their jobs at Vermont Bread’s bakery on Cotton Mill Hill in Brattleboro.
Employees did not have advance warning. Workers who showed up on April 26 were greeted with a closure notice on the door.
Legal action is under way on lost pay and benefits related to the layoffs.
Attorney General TJ Donovan has led efforts to ensure the former employees get their full paid-time-off compensation.
He told VBM: "My office is taking in the developments reported in the media about Koffee Kup Bakery's new buyer. Koffee Kup employees are entitled to their full PTO. We will continue to monitor this situation.”
The deal with Flowers presumably will satisfy the paid-time-off claims from employees, according to the Reformer. The state is also looking into whether the owner violated the WARN act, which requires a 60-day notice for large layoffs.
Labor Commissioner Michael Harrington said at Governor Scott's press briefing today that it appears the former owner made a good-faith effort to find a new buyer up to the last minute. While he does have a final legal opinion, they likely will be exempted from the WARN requirement.
Brattleboro Reformer: Vermont Bread employees to get owed money, but bakery not reopening
"This acquisition brings brands and production capacity in the Northeast, a key growth market for our company," said Ryals McMullian, Flowers Foods president and CEO. "The Koffee Kup and Vermont Bread Company brands have a strong consumer following in the region and we'll be evaluating their role within our brand portfolio. We have no immediate plans to reopen the bakeries but will be assessing how they may fit our strategic network optimization efforts in the future."
Meanwhile, the Hyslops issued this statement:
A statement from Rosalyn Hyslop and Blair Hyslop-
Recently, North Atlantic Baking Company / Mrs Dunster’s (1996) inc. participated in a court appointed receivership process to acquire the assets of Koffee Kup Bakery, which included the Vermont Bread Company and Superior Bakery.
North Atlantic Baking Company was subsequently advised by the receiver that our company was the successful bidder and we began working on agreements to finalize the purchase of the assets. All parties were aligned to the need to get employees back to work, so in the meantime we worked with employees, vendors, customers, and distributors to do just that. We were fully prepared to start operations on Tuesday morning, June 8, 2021, with purchase orders in hand, believing in good faith that the agreements we negotiated with the receiver would be signed Monday, June 7, 2021.
Yesterday, we were shocked to receive an insensitive letter from the receiver revealing that over the weekend, Key Bank and the receiver Ronald Teplitsky had negotiated the sale of Koffee Kup Bakery to a new party. To our knowledge the new party did not participate in the original court sanctioned process and in a statement released yesterday Flowers Foods & Subsidiaries has no immediate plans to operate the bakeries.
As a family-owned company, we stood with our integrity on full display in front of employees, customers, vendors, and distributors to restore hope for the future. A large team of dedicated people worked tirelessly under tight timelines with the aim to get the much beloved Koffee Kup Bakery back up and running.
We are absolutely devastated for all the employees, vendors, distributors, and their local communities.
Rosalyn & Blair Hyslop
North Atlantic Baking Company / Mrs Dunster’s (1996) inc.
East Baking Company of Holyoke, MA, also had received a VEGI award in early May, before the Hyslops. But the receiver eventually designated the Hyslops as the "preferred buyer," until Flowers came along.
Even though both of them appear to have lost out, East Baking is still interested.
East Baking Company Vice President Jeff McCarroll told Vermont Business Magazine in an email Tuesday morning that, "We are accessing all avenues. We believe there are ways to challenge this."
He added, "The avenue for challenge to this is Clayton and Sherman acts. We believe Flowers and the reciever did this in a ramrod fashion to try to minimize the look at this. If this was a normal purchase FTC would have to ok this. I think that will be brought to forefront soon."
The Federal Trade Commission oversees the Sherman and Clayton antitrust laws. The Clayton Act specifically prohibits mergers and acquisitions where the effect may be to substantially lessen competition, or to create a monopoly.
"We think the story is an important one," McCarroll said. "It effects us as a company for sure, but what Flowers and the receiver are attempting is unconscionable. It will effect people negatively."
KKB was founded in Troy, Vermont in 1940. The company baked breads, English muffins, buns, and donuts that were marketed throughout the Northeast. In 2013, the company acquired Vermont Bread Company, which produced certified organic breads. KKB closed in April 2021.
About Flowers Foods
Headquartered in Thomasville, Ga., Flowers Foods, Inc. (NYSE: FLO) is one of the largest producers of packaged bakery foods in the United States with 2020 sales of $4.4 billion. Flowers operates bakeries across the country that produce a wide range of bakery products. Among the company's top brands are Nature's Own, Dave's Killer Bread, Wonder, Canyon Bakehouse, and Tastykake. Learn more at www.flowersfoods.com.
Source: THOMASVILLE, Ga., June 7, 2021 /PRNewswire/ -- Flowers Foods, Inc