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Sunny Delight Beverages Co.

Background:
The Sunny Delight Beverages Co. ("Sunny Delight" or the "Company") produces Sunny D beverages, which is the leading brand in the chilled juice drink segment globally. Originally created in Florida in 1964, Sunny D is a leading brand in the U.S., Canada, Spain, Portugal, United Kingdom and France. Since acquiring Sunny D in 1989, The Procter & Gamble Company ("P&G") had more than quadrupled the sales of the brand through geographic expansion, new flavors and packages, and effective marketing. The brand's line-up includes Tangy Florida Style, Smooth California Style, Tropical Punch Caribbean, a calcium fortified version, no added sugar variants, Lemonade and a variety of sizes, including the fast selling 333ml Big D sports bottle. Over the course of its 38-year history, Sunny Delight has established itself as the "Good Stuff Kids Go For" and is positioned as a more nutritious alternative to carbonated soft drinks, while being a less expensive, better tasting alternative to orange juice. Its broad portfolio of flavors and sizes has wide consumer appeal, with particular strength among the demographic segments of kids, Hispanics and African-Americans.

A few months after the closing of the Sunny Delight transaction, we received inquiries from global beverage players to acquire Sunny D's Punica brand in Europe. Although we could have entertained these discussions by ourselves, we decided to seek the help of Sawaya Segalas with whom our beverage relationship goes back to the sale of Snapple Beverages to Quaker Oats in the mid-90s. This was a wise decision as they managed to orchestrate a discrete and efficient process between a number of parties. Their ability to quickly get up the learning curve, their understanding of the business, and their transactional skill set were all invaluable in making this a success. They were able to assist our management team in packaging the Punica story and orchestrate a tight competitive auction between two of the leading candidates that maximized the sale outcome beyond our expectations.
John W. Childs
Chairman and Chief Executive Officer, J.W.Childs Associates, L.P.


On April 1, 2004, J.W. Childs Associates, L.P. ("JWC") announced that it had signed a definitive agreement to purchase the Sunny D and Punica juice drink businesses from P&G for an undisclosed amount. Since acquiring Punica in 1984, P&G had more than tripled the sales of the brand through several innovations, including the launch of Schorle and Tea and Fruit flavors, and PET packaging forms. At the time of the announcement, Sunny Delight had more than $550 million in annual sales, operated in eight countries across North America and Europe, owned or leased six manufacturing facilities and had approximately 700 employees. As part of the transaction, P&G agreed to provide transition services for up to twelve months to allow for a smooth transition, and enable the business to continue on its current growth trend without any major disruptions. The transaction closed in August 2004.

Objective:
Within six months of its acquisition of the Sunny Delight beverage business from P&G, JWC had received several inbound inquiries from global strategic players as to the potential availability of the Punica brand of fruit juice, sold primarily in Germany. After a considered review of its alternatives, JWC decided to sell the Punica brand in order to de-leverage Sunny Delight's balance sheet, and to allow management to focus on the Sunny D brand in the U.S. and Western Europe.

Process Highlights:
Sawaya Segalas, who had an existing relationship with JWC from other transactions, was retained to work with the Sunny Delight U.S. team in the preparation of information and financials that carved Punica out of the parent company, a challenging assignment given no interaction with the local team in Germany. JWC sought a discrete auction involving a limited number of global strategic players, a process that would minimize the involvement of local management in Germany until necessary, and to maximize value. Sawaya Segalas then contacted a select number of global strategic companies to inform them the brand was available, conducting an efficient and discrete process that included a modified confidential information memorandum, initial indications of interest, management presentations in New York, assembly of an electronic data room to facilitate internationally based diligence teams and final diligence and negotiations in Hamburg and New York. The firm flawlessly coordinated large groups of internationally located business and legal diligence teams, allowing each to achieve appropriate diligence in order to submit complete final offers.

Outcome:
PepsiCo, Inc. ("PepsiCo") put forward the most complete and compelling offer for the business, in a highly successful outcome to an efficient and effective process. Punica represented a strategically important asset for PepsiCo's growing presence in Germany, and the Punica sale resulted in a highly successful deleveraging exercise for Sunny Delight and JWC. The acquisition immediately expanded and strengthened PepsiCo's German beverage portfolio by providing a leading position in several juice-related categories. The addition of Punica dramatically expanded PepsiCo's juice business in Continental Europe, which included Tropicana® and several affiliated brands. The purchase also established Germany as one of PepsiCo's largest juice and juice-drink markets in Continental Europe.

Subsequent Events:
On May 30, 2007, the Company announced that it had sold three of its primary domestic bottling facilities located in Anaheim, CA, Dayton, NJ, and Atlanta, GA to Angelo, Gordon & Co.'s dedicated Net Lease Group. Proceeds of the sale-leaseback transaction primarily were used to pay down senior indebtedness and therefore free up valuable capital that could be used to grow the business.
On October 2, 2007, the Company announced that it had signed an agreement to purchase Fruit20 water and Veryfine juice brands from Kraft Foods Inc. ("Kraft"). The transaction is expected to be completed during the fourth quarter. The Veryfine plant in Littleton, MA will be part of the acquisition, as will a state-of-the-art packing line at a Kraft facility in Fresno, CA. As part of the transaction, approximately 200 Veryfine employees will join Sunny Delight. Fruit20 is the leading zero calorie fruit flavored water, and Veryfine has been providing high quality beverages since 1865.
J. W. Childs/Punica
Client
Sunny D
Brand
Punica
Owner/Parent
J.W. Childs Associates, LP
Counterparty
PepsiCo, Inc.
Segment
Food & Beverages
Transaction
Corporate Divestiture
Transaction Value
Undisclosed
Closing Date
June 1, 2005
Role
Exclusive Financial Advisor
 
 
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