Dive Brief:
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Spangler Candy Co. was the successful bidder at a May 23 federal bankruptcy auction to acquire New England Confectionary Co. (Necco). The Bryan, Ohio-based maker of Dum Dums lollipops and marshmallow Circus Peanuts beat out two other bidders with a $18.83-million offer for the maker of Necco Wafers and Sweethearts, The Boston Globe reported.
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Harry Murphy, Necco's court-appointed bankruptcy trustee, told The Boston Globe that buyers were mainly interested in Necco's "sugar line," where its Wafers and Sweethearts are made. The fate of the company's other brands, such as its Clark Bar, Mary Jane and the chocolate Sky Bar, is unknown, although the plant in Revere, Massachusetts, will continue to operate, according to USA Today.
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Spangler is a private, family-owned company that has been in business since 1906. It has about 550 employees in the U.S. and 230 more in a co-manufacturing plant in Mexico. Besides Dum Dums and Circus Peanuts, it makes candy canes, Saf-T-Pops, Caramel Creams and Smarties.
Dive Insight:
There are several reasons why Spangler would want to buy Necco, which calls itself the oldest continuously operating candy company in the U.S. The acquisition brings well-known and popular brands into the Spangler portfolio, plus there are likely to be efficiencies between the Ohio and Massachusetts plants it can leverage to bring down Necco's operating costs.
When Necco first moved into its Revere headquarters in 2003, it was considered a state-of-the-art facility. The company had about 400 employees in recent years, but is reportedly down to fewer than 100 as Necco's debt to creditors piled up and the company finally filed for Chapter 11 bankruptcy last month.
It may be more promising for Necco's future that Spangler — a long-time candy company with solid experience — was the successful bidder rather than Round Hill Investments, Kgbdeals Shopping Inc. or Gordon Brothers liquidators. While Round Hill's chairman, C. Dean Metropoulos, rescued Hostess Brands from bankruptcy in 2013 and knows how to revitalize a brand, the investment firm's initial high bid of $15 million for Necco may have been the most it was willing to risk.
Even though Spangler was successful in the auction, the company will likely be making some tough decisions in the near future about which Necco brands it will retain and which will have to go. In addition, some of the manufacturing equipment used to make Necco Wafers and Sweetheart candy hearts dates from the 1940s and 1950s, so Spangler may have to assess its condition and any maintenance needs.
Chances are the new owner will also have to invest in upgrading the Revere plant since a recent U.S. Food and Drug Administration inspection found that the building, fixtures and utensils have not been adequately maintained to prevent product adulteration from occurring. FDA inspectors also cited rodent activity in the plant. The agency's May 16 warning letter gave the company 15 working days to explain how it's fixing these problems.
Once Necco's debt and facility problems are in hand, the company's popular Wafers and Sweethearts are likely to be warmly welcomed back by fans. However, Spangler has an uphill road ahead to get to that point.