Foster & Gallagher filed yesterday for Chapter 11 bankruptcy protection after ceasing operations Friday and laying off thousands of employees.
The filing involves 21 of the firm’s domestic subsidiaries, including its Spring Hill, Michigan Bulb and Gerney’s groups. Michigan Bulb closed last Friday, resulting in the layoff of 225 people in Walker, MI.
The company listed both its assets and liabilities to be in excess of $100 million, according to court documents.
Listed among the 20 largest unsecured creditors are R.R. Donnelley Inc., which is owed $2.5 million, Quimby-Walstrom Paper Co. $1.6 million and World Color Direct $868,067.
Also listed are Spencer Press Inc. $613,687; Valassis Communications $545,152; Midland Paper $464,639; Mail Well Envelope $311,862; American Litho $255,730 and Cox Target Media Sales Inc. $190,250.
Meanwhile, a former executive of the horticultural cataloger is bidding to purchase Foster & Gallagher and save some 500 jobs in Peoria, IL, where the company is headquartered, according to the Peoria Journal Star.
The firm said that it plans “an orderly wind down of the businesses and to sell all or substantially all of its assets.” The bankruptcy petition was filed in the U. S. Bankruptcy Court of the District of Delaware.
Potential purchasers are being sought for the sale of some of Foster & Gallagher’s remaining operations including the Walter Drake Gift Group which has been sold for about $14 million, the Journal Star reported.
Last Friday, the company ceased operations throughout the United States, Canada, Holland and Japan. The company had employed about 3,000 employees most of which were laid off.
The employee-owned firm’s annual sales fell from a peak of $476 million in 1997 to $337 million last year, resulting in a $7.7 million loss, according to a company newsletter. In 1997 the company had operating profits in excess of $36 million.
In a letter to Michigan Bulb employees, vice chairman Robert Pellegrino said that the company “simply ran out of money and the banks to whom we were indebted said they could no longer support our continuing operations.”
A number of alternatives had been unsuccessfully explored by the company’s management team, board of directors and bank lenders. These include a financial restructuring, operational reorganization of the core businesses and a sale of strategic assets, the company said.
The former executive bidding on the failed company–a Peoria businessman, who requested anonymity–was hopeful that lenders would accept his bid of about $20 million, to purchase the horticulture divisions of the company. The bid has so far been rejected because it is considered to be to low, the Journal Star reported.
The businessman told the paper that he hoped to keep the 500 or so Peoria-based Foster & Gallagher employees fired Friday ready to return to the offices there.
The bankruptcy filing ended months of speculation as one by one, key executives and board members quit the company in recent days. Those resigning included Robert A. Ostertag, Jr. president and CEO, board chairman Melvyn R. Regal and Ellen D. Foster, an advisory board member and the widow of founder Thomas Foster.
The company and several executives are also fighting a lawsuit over an alleged 91% drop in the value of the employee stock option plan (ESOP). That lawsuit alleges that the defendants drove the ESOP deeply into debt by purchasing stock valued at more than $120 million from shareholders including Thomas Foster. The action was filed April 6 in the U.S. District Court, Central District of Illinois, Peoria Division.
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