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| Source: | LOHAS Weekly Newsletter |
| Published: | Thursday, November 01, 2001 |
by frank lampe
LONDONDERRY, N.H.—It’s not often that the seller gets to dictate the terms of the deal. But it appears that’s exactly what Gary Hirshberg, CEO, president, chairman and co-founder of Stonyfield Farm, has done.
The 18-year-old company announced last month that it had sold a 40 percent interest to dairy, bottled water and biscuit giant Groupe Danone S.A. of France for a reported $50 million, with the funds being used to buy shares from nearly 300 selling shareholders. Danone can buy all outstanding shares, excepting those owned by employees, in two years, giving it approximately 75 percent ownership. Lazard LLC acted as a financial advisor to Stonyfield.
Danone’s interest was no doubt stirred by Stonyfield’s No. 4 position in the highly competitive yogurt market (Danone is ranked No. 2), with a No. 1 ranking in the natural yogurt segment. Stonyfield plans to rack up approximately $85 million in revenues this year, based on a 34 percent growth rate. Selling primarily organic offerings and wearing its socially responsible mission proudly, the company has enjoyed a 10-year, compound annual growth of 24.7 percent.
But what escaped most media accounts of the transaction, and what is most remarkable in today’s world of consolidation frenzy, is the fact that Hirshberg negotiated with Danone to continue to run the company as CEO and retain control of three of five board seats for as long as he chooses, up until 2016.
Under the terms of the partnership, which took two years to negotiate, the only way Hirshberg can be ousted is if the company fails to meet what he refers to as “reasonable” performance goals. The move is widely seen as a win-win for both Danone and Stonyfield: Stonyfield gains access to the financial and operational resources and efficiencies of its larger sibling; Danone gains entry in the fast-growth organic foods market.
What happened at Ben & Jerry’s Homemade was certainly not lost on Hirshberg. When conglomerate Unilever bought the company in 2000, founders Ben Cohen and Jerry Greenfield had high hopes for instilling some of their socially responsible values into Unilever’s corporate culture. But things started to sour after the company named a CEO who didn’t share their commitment to socially responsible business.
In fact, Hirshberg says, he spent a fair amount of time discussing his, and their, situations with his old friends.
“Danone originally wanted control, but the current deal was less threatening to me, our board and our consumers,” he says. “It allowed everyone to get comfortable with Danone’s involvement.”
Danone, which has policies on environmental stewardship and operates the Danone Institute to further research health and nutrition, has some veto rights. Additionally, Stonyfield is limited to expansion within the dairy, yogurt, soy products or ice cream categories. The deal specifies no Stonyfield distribution outside of the U.S. and Canada; the company can’t make acquisitions or divestitures over a certain dollar amount without approval, although Stonyfield would control any acquisitions in the categories it covers.
“The Stonyfield/Danone partnership is an excellent model for enabling emerging values-driven firms to gain in strength and stature while remaining loyal to the growing base of consumers who support organic and natural products,” Hirshberg said in the release accompanying the announcement of the placement.
“Balancing the goals of being a for-profit company and being socially responsible is like riding three horses in the circus—it’s very difficult to do, particularly when dealing with how to ensure the growth of the company as well as treat the stockholders well,” notes one industry observer. “Gary has done an excellent job of riding all three horses.
“The deal is unusual in terms of standards of how deals are generally done, but it was done because of his vision and tenacity. He was able to hold the line.”