- Tony Sarsam, CEO of Borden Dairy, told Food Dive he will be stepping down in late July. A court on Friday approved the company's sale out of bankruptcy to Capitol Peak Partners and KKR & Co. Sarsam took the helm at the company in March 2018. Borden filed for Chapter 11 bankruptcy in January.
- Capitol Peak will assume majority ownership and KKR, an existing lender to Borden, will be a minority investor. Capitol Peak is led by Gregg Engles, a former chairman and chief executive of Dean Foods. Engles will take over as CEO after Sarsam leaves Borden.
- "My mission when I came here changed once we began understanding the realities of the debt problem that was weighing on the company," Sarsam told Food Dive in an interview.
After two years at the company and five months after it declared bankruptcy, Sarsam will step down as the company takes on new leadership and emerges from Chapter 11.
"My top priority these last six plus months has been to get the best outcome for all 3,300 employees at Borden, and this outcome with Capitol Peak is the best outcome," Sarsam said. "For me and for perhaps a few others, we're going to move in a different direction, but that was still our mission, to get the best outcome for Borden and we've done that."
This month, Capitol Peak Partners and KKR & Co. formed a joint venture and won a bankruptcy auction for Borden. After union objections threatened the deal, the $340 million sale was approved by the court on Friday.
Borden's business will remain intact, including all plants, branches and the brand, the company said. The newly reorganized company will continue to employ all its workers as well. Borden’s main reason for its bankruptcy filing was to reduce its debt load, but it was also facing challenges with the dairy space. Milk companies like Borden have struggled in recent years with increasing competition from milk alternatives, falling milk consumption, innovative startups and deeply discounted private label offerings. Rival Dean Foods filed for bankruptcy just two months before Borden.
Borden once had a presence in all 50 states as one of the largest dairy companies, but as of last summer, it offered 35 products in the Midwest, South and Southeastern U.S. In its filing, the company cited a 46% drop in fluid milk consumption per capita from 1980 to 2018.
Capitol Peak and KKR are accustomed to the struggles facing the dairy industry today.
KKR returns to Borden's ownership with this bankruptcy sale. The firm bought Borden for $2 billion in 1995 and took it private after about 68 years as a public company. Over the years, KKR remained on as a lender.
Sarsam said that Capitol Peak will be bringing in its own senior leadership team members, including Engles as chief. Engles, who ran Dean Foods for about 18 years, founded Capitol Peak in 2017.
"The Capitol Peak team is excited by this unique opportunity to work alongside KKR and build this iconic dairy company," Engles said in a release.
Engles has experience taking over dairy companies. In 2001, Suiza Foods acquired Dean Foods, its rival at the time, and Engles, who was CEO of Suiza, took over the new Dean. The company started out strong, but in his time there, it faced antitrust lawsuits and declining milk sales.
Engles' reputation was mixed during his time at Dean Foods. He went from being called the "milkman to the nation" to Forbes ranking him among its Worst Bosses for the Buck in 2011.
Toward the end of his time at Dean, Engles presided over Dean's spinoff of WhiteWave Foods, which included brands like Silk and Horizon Organic. He took over as CEO of WhiteWave, departing from Dean, in 2013. He then sold WhiteWave for $12.5 billion to Danone in 2017.
Sarsam called the new leadership “deep veterans of the dairy industry” and said he is confident they will do well.
Sarsam, who has more than three decades of experience in the food industry working for companies including PepsiCo and Nestlé, said he’s just begun to contemplate his next steps. He said that he likes businesses like Borden, “people-intensive businesses” that make and sell products, and noted there are many where he could provide value.
Would Sarsam change anything about his tenure at Borden if he could go back? "I don't really spend a lot of time thinking what if I had a time machine. If I had to do this all over again, I would do it all over again," he said. "Me and my team, we played a small part in adding to this storied history of this 163-year-old company, and I feel great about that. The company will soldier on from here forward."