(March 13) MIDDLEBORO, Mass. — A seemingly on-again, off-again courtship between Ocean Spray Cranberries Inc. and Northland Cranberries Inc. may be on again.
A little more than a week after Middleboro-based Ocean Spray was reported to have rejected an $800 million buyout bid from Wisconsin Rapids, Wis.-based Northland, Ocean Spray voted to replace its board of directors with a new group the company says will be open to “all options.”
Those options apparently include a possible sale.
“They’re looking at all options, but that doesn’t lead automatically to the notion of sale to anyone,” said Chris Phillips, an Ocean Spray spokesman. “They’re not going to rush to that conclusion.”
Ocean Spray rejected an unsolicited bid of $800 million from Northland, although John Swendrowski, president and chief executive officer of the Wisconsin company, said he never got a definitive answer from Ocean Spray.
“Our offer stood open until March 18, and as of this moment we’ve never received an official response from Ocean Spray that says they have rejected it,” Swendrowski said March 10. “We’ve read it in the paper, but that’s about it.”
Phillips said the offer was turned down, but by the outgoing 15-member board.
That’s a big difference, Swendrowski said.
“The new board ran on a slate of exploring all alternatives, and I’d certainly hope that they’d consider our offer an alternative,” Swendrowski said. “It’s the brand we want.”
It’s a time of renewed focus for Ocean Spray. The company, a 900-member cooperative, has 12 members on its new board, down from 15 and 25 in 2000.
“They felt it was a better forum for making decisions,” Phillips said of the smaller board.
A new board and a possible sale of the company does not imply any changes for Ocean Spray’s grapefruit segment, Phillips said.
“Grapefruit is obviously very much a part of the cooperative, and those growers will be well represented,” Phillips said.
There is little concern for Fort Pierce, Fla.-based DNE World Fruit Sales, nearly 80% of whose citrus shipments bear the Ocean Spray label, said David Mixon DNE vice president.
“Basically, it doesn’t (impact DNE) at all,” Mixon said. “DNE has a brand contract with Ocean Spray, whoever its ownership is,” Mixon said. “And, it’s growing every year.”
He added that total shipments of Ocean Spray citrus products could reach 15 million cartons in 2003.
Part of reasons for the change in the board was that the company wants to focus on being more responsive to its member growers, Phillips said.
“The point is, as this new board takes the reins, Ocean Spray is starting from a position of strength as a company,” he said. “But there’s an enormous amount of work to be done to get the returns back to where they need them to be.”
There is still a vacancy at the top of Ocean Spray’s corporate roster. In November, Robert Hawthorne resigned as chief executive officer after less than three years on the job, and the company is searching for a successor.
“The company is looking for someone with a strong consumer goods marketing background and who would understand the dynamics of a unique agricultural cooperative,” Phillips said, adding that no potential candidates had yet emerged.
In the meantime, Ocean Spray director Barbara Thomas is serving as CEO of the firm, which controls more than 75% of the world’s cranberry supplies, although only a small percentage of the cranberry crop goes to the fresh market.
Northland, the world’s largest cranberry grower and a member of Ocean Spray’s cooperative until 1993, wants to buy Ocean Spray’s juice business and brand and last week made an offer which was made public Feb. 27, just before Ocean Spray’s March 8 annual meeting.
The announcement of the offer was purely coincidental to Ocean Spray electing its new board, Swendrowski said.
“It was very unfortunate that we had to announce our offer when we did,” he said. “We made the offer six days before we announced it.”
He said the offer was not made public in anticipation of a new board at Ocean Spray.
“We said that we don’t want to interfere with their corporate governance,” Swendrowski said. “We have no interest in who gets elected. We’re willing to meet with whoever gets elected to the board. We’re sorry it happened that way.”
But, he added, he remains hopeful that the offer ultimately will be accepted.
“I am confident that the board of directors will act in a manner they believe will be is in the best interest of shareholders of Ocean Spray,” Swendrowski said.
The timing of the offer, nevertheless, apparently did not please the Growers Information Coalition, which represents cranberry and citrus growers.
The group, in published reports at the time the offer was made public, said that it was premature to consider the bid at that time and said that the offer had a “disruptive impact.”
Gary Dempze, vice president and treasurer of Wisconsin Rapids-based Gaynor Cranberry Co. and one of the new members of Ocean Spray’s board, served as a spokesman for the coalition at the time Northland’s offer was made public. But he declined to comment on the matter March 13.
Along with acquiring Ocean Spray’s juice brands, Northland also proposed to pay $35 each for up to 3 million barrels of Ocean Spray growers’ berries in the first year of a 15-year purchase agreement.
However, in its initial rejection of the offer, Ocean Spray claimed that the supply agreement would cover less than half its members’ annual production.
The supply agreement proposed by Northland also is filled with escape clauses, Ocean Spray said, pointing to an option for Northland to drop the fruit price paid to remaining cooperative members.
Both Northland and Ocean Spray have suffered as the price of cranberries has dropped in the past five years. Since 1998, the price of cranberries has slid from about $60 a barrel to $20-25.
“That is exactly the sort of thing the new board will be addressing,” Phillips said. “It’s defining and refining the strategic direction for Ocean Spray, but it will be a combination of fortifying the brand, streamlining the company and boosting grower returns.”