At A Price Of Less Than One Times Solo's Annual Sales Revenue. . .

The Dart offer is clearly a bottom-fishing offer. But it would seem that Solo Cup has few other viable options, given the coming pinch on its debt covenants -- some $700 million worth of due-bills, looming.

Overnight, the Financial Times highlighted how the failure of the executive officers to efficiently intergate the Sweetheat operations (post-2005), led to this fire-sale pricing. Solo simply took on too much debt, and generated too little in savings, to cover the high price it paid for Sweetheat. From the Times' reporting, then:

. . .Solo, which has $1.6bn in annual sales, bought Sweetheart, another competitor, in 2004 for $917 million. However, Solo failed to integrate the acquisition and struggled under the debt it had assumed to buy the company. Within two years, the botched deal pushed the company into a lossmaking position.

Vestar Capital Partners, a New York private equity firm, put up $240m to help finance the Sweetheart deal, and in 2007 exercised an option to take a one-third stake in Solo. Leo Hulseman, Solo’s founder, maintained majority control. . . . [Solo] slashed capacity, closing plants and cutting more than 1,000 jobs. . . .

Truly unfortunate. It didn't have to end like this. I now understand why Solo executives resisted putting a minimum price threshold into the $500,000 special payouts for a deal in under 90 days, though.