Case Study: Doskocil Companies, Inc.

A publicly traded food products manufacturer acquired a much larger meat packing company in an unfriendly tender offer.  Unable to complete planned asset sales and retire acquisition debt, the company subsequently filed for Chapter 11 bankruptcy.  We were retained as financial advisors to the parent company’s unsecured creditors’ committee, composed primarily of bondholders.  A major accounting firm represented the unsecured creditors of the acquired business and a well-known investment firm represented the secured bank lenders.  The initial position taken by the various stakeholders in the case and their professionals was that our clients would realize little or no value in the reorganized company since their borrower, the parent company, had significantly leveraged the business to fund the buyout.

This was a complex Chapter 11 case involving both union and non-union workforces, retiree medical and pension issues, complicated acquisition accounting, hotly contested views on the share of value contributed by each of the company’s operating entities and numerous go-forward strategies.  Our analyses of the brand equity of the products of each of the businesses and the potential marketing and distribution synergies that could be obtained by integrating the businesses, led to the development of the operational restructuring plan that formed the basis for the approved plan of reorganization.

Our in-depth review of the acquisition accounting, and detailed analysis of the forecast models prepared in support of the plan of reorganization enabled our clients to realize a controlling stake in the reorganized company.  The unsecured creditors of the much larger acquired business realized a minority stake in the reorganized business.  The approved plan of reorganization provided for payment in full of the secured bank debt over a period of seven years. As part of the reorganization, we were retained to coordinate the changes in management and the Board on behalf of the new stockholders.  Subsequently, a larger competitor acquired the reorganized company at a price three times the Chapter 11 exit valuation.