OpenGate Capital LLC, a Los Angeles-based private investment and acquisition firm, announced the closure of Golden Guernsey, which was one of its portfolio companies.
The closure of the dairy left more than 100 people out of work. The Wisconsin Department of Workforce Development said it is investigating complaints that the company did not comply with the state’s plant closure law, which requires a 60-day notice be filed with the state and the affected municipality.
OpenGate Capital acquired Golden Guernsey in September 2011 from Dean Foods after the U.S. Department of Justice required Dean Foods to sell the business in order to resolve antitrust concerns that Dean Foods' share of the school milk supply business was too large.
OpenGate Capital said that when it acquired Golden Guernsey, the acquisition terms included an exclusive and fixed-price milk supply agreement, and the assumption of a legacy union contract. As Golden Guernsey was under pressure to meet demands for lower cost products, it was unable to successfully reduce its expenses in a way to achieve a state of financial viability given some of its legacy relationships, according to OpenGate Capital.
Since being acquired by OpenGate Capital, Golden Guernsey made efforts to reduce its expenses through discussions with its various suppliers, vendors and the labor union.
“The prospect of closing the plant and the potential for bankruptcy was raised on several occasions with these groups, all of which were provided with a clear picture of Golden Guernsey's fragile financial condition. Despite this, Golden Guernsey's efforts were rejected, leading to the closure of the business,” OpenGate stated in a press release.
The bankrupcy petition said Golden Guernsey has at least 200 creditors, assets $10 million to $50 million and liabilities of $10 million to $50 million.
Andrew Nikou, OpenGate Capital's chief executive officer, said, "We have to make realistic decisions about our investments, and the reality is that the Golden Guernsey business was unable to achieve financial autonomy given the pressure to lower prices and seemingly non-negotiable operating expenses. This was a very difficult decision given the loss of jobs and disruption to milk delivery service, yet it had to be made. The closure of the plant is not a reflection of the hard work contributed by the Golden Guernsey family of employees. Unfortunately, when expenses overwhelm revenue for too long, and we are unable to achieve cooperation from the people with whom we do business, the business cannot be sustained."
Golden Guernsey was established in Milwaukee in 1930.