Firm behind PennySaver closure cited in abrupt shutting of Wisconsin dairy
Layoff meetings are never fun, but this one was surreal.
PennySaver workers filed into the printing plant of company headquarters in Brea, squeezing tight amid the machinery, to find their boss, Chief Executive Ronald Myers, sitting silently at a table.
Then, echoing through the 100,000-square-foot building, they heard the voice of Barry L. Kasoff, president of Realization Services Inc., a firm specializing in corporate restructurings. It was Kasoff who presided over the meeting by phone from the firm’s New York offices over two loudspeakers.
The workers had been shocked late Friday to learn that the advertising newsletter publisher owned by private equity firm OpenGate Capital had abruptly shut, and they were suddenly jobless.
As employees held up phones to record the call, Kasoff described the firm’s financial problems — drooping revenue, rising postage costs and an inability to mount an online strategy. The company’s lender, he said, had pulled funding.
“There is no positive news for PennySaver today,” Kasoff’s voice boomed. The company might not even be able to honor paychecks that had recently been issued, he said. Employees were not given more notice, he said, because under the circumstance the law did not require it.
Some of the held-up phones sagged. Heads fell. A few employees walked out; a couple of others screamed.
The stunning plant closure puts a spotlight on a company called OpenGate, based in Los Angeles, a relatively small player in the giant private equity business, which seeks to profit from the buying and selling of private companies.
Ideally, private equity companies take underperforming, supposedly undervalued companies and spruce them up for sale, a concept not much different from getting a deal on a cruddy old house, fixing it up and selling it for a profit.
Founded in 2005 by Canadian-born Andrew Nikou, a USC graduate, OpenGate owns companies across a range of industries, including TV Guide magazine, Europe’s Agis Fire & Safety fire protection systems company and a Brazilian telecommunications provider. Its companies generate about $3 billion in annual revenue, OpenGate reported. More than 30 deals have been completed to date. OpenGate said it specializes in “working with management teams to restore business fundamentals while building long term growth.”
The company said Nikou would not comment.
Not all of OpenGate’s deals work out. In 2013, another of its investments went under: Golden Guernsey Dairy in Waukesha, Wis.
Shortly after New Year’s Day two years ago, Robert Storm got a late-night call from a fellow dairy worker saying the dairy where he worked for 19 years had been shut, the gate padlocked, its 100 employees let go.
“I feel for those people,” Storm, 67, said of the PennySaver employees. “That’s crazy. It’s not right.”
Wisconsin’s Department of Workforce Development cited the operating company for failing to give employees and other parties 60 days’ notice of the coming plant closure, as required by law, and said employees are due $1.6 million in wages and other benefits.
A bankruptcy case is currently pending in U.S. Bankruptcy Court in Delaware, according to Charles Stanziale, a Newark, N.J., lawyer acting as trustee for the dairy.
“They didn’t give them notice, and one day they just decided to shut the door,” Stanziale said.
OpenGate did not respond to questions about the Wisconsin case. In a 2013 press release announcing the bankruptcy, OpenGate had said, “As Golden Guernsey was suffering under the 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.”
In PennySaver’s case, its lender, a unit of Capital One Financial Corp., of Tysons Corner, Va., pulled funding, triggering the closure. Representatives of Capital One didn’t respond to a request for comment.
Ahead of Tuesday’s meeting in Brea, about 200 PennySaver employees gathered in batches across the company’s parking lot. The somber, anxious mood resembled a funeral for someone’s unexpected death. Many wore red shirts and sweaters to match PennySaver’s logo.
Then they entered the printing plant for what a company email described as an “optional” informational meeting for which they would not be paid.
Lori Horn, who started working at PennySaver 15 years ago after responding to a job ad in the booklet, fears she might have to move. She had most recently worked as an assistant at the company’s Mira Loma printing plant, earning $17.50 an hour.
“It’s taking a toll on our lives,” said Horn, a single mother with two teenagers at home in Riverside. “We have no paycheck.”
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