PHILADELPHIA (CBS) - A Georgia-based company is taking over Philadelphia's Tasty Baking Company.
After Tasty's profits went stale in the economic downturn and the company piled on roughly $100 million in debt to build and move into its new plant in the Navy Yard in South Philadelphia, a larger competitor, Flowers Foods has been mentioned as a suitor.
The Flower Foods statement calls it a "definitive merger agreement" whereby Flower Foods will acquire all of the outstanding shares of Tasty common stock for $4.00 a share, for a total purchase price of about $165 million. That includes the debt Tasty has taken on.
Industry observers believe it will strengthen Flowers' snack cake business through the addition of the iconic Tastykake brand, and expand the company's geographic reach.
Trading in Tasty's shares were halted after Flowers made the offer. Its previous close was $1.61. Before the 9:30am Monday morning bell, the shares were at $3.98.
Tasty was on the ropes earlier this year but got a reprieve until June 30th by securing public and private debt financing (see related story). But one of the stipulations was that it pursue consummating a sale or merger.
Tasty Baking declined any interviews and would not comment about the future of the company's 740 full time employees. Instead, the company released a video clip of company president Charles Pizzi.
"Tastykake will be a Philadelphia brand made here by Philadelphians," promised Pizzi.
Business professor Michael Boldin says the sale was inevitable because of company struggles. He expects the people and the production to stay in South Philly. He says the only jobs in jeopardy are management.
"No one was happy with Tastykake financials lately. [Managements'] longevity with the company is limited," says Boldin.
Flowers says it is delighted to welcome Tasty's 740 workers to the Flowers Foods family, adding that its plan is to invest in the combined businesses for sustainable and profitable growth.
Reported by Steve Tawa, KYW Newsradio; Oren Liebermann CBS 3
for more features.