On March 21, Dart Container Corporation signed a Definite Agreement to acquire Solo Cup Company for $1 billion; the story was released in a Businesswire article late Wednesday night. Management at both companies appear to be extremely pleased with the acquisition and believe that the companies combined resources will allow for plenty of growth in the future. The CEO and founder's son, Robert Dart, explains:
"Dart Container’s acquisition of Solo will accelerate the progress Solo has made to improve its levels of service and customer support. We will use our expertise in running a successful, efficient, reliable and service-oriented company to create an organization that blends the best of both Dart and Solo for the benefit of our customers.”
Solo Cup executives were equally as pleased. Robert Hulseman, chairman of Solo Cup Company, stated:
"I am very proud of this company’s contributions to the foodservice packaging industry and extremely pleased that many of Solo’s dedicated employees will have the opportunity to continue making a difference for our customers. This is a positive outcome for everyone involved."
This is Dart's second such takeover this month. On March 6, Dart bought Brazilian manufacturer of foam foodservice products--Brasbar Disposable Packaging. The moves make sense for Dart as the company continues to grow its balance sheet as well as the number of products in can offer customers. Dart details how exactly the merger will effect their current customer value proposition,
"It will enable customers to purchase a wider range of products, made from a greater variety of materials with varying functional and environmental attributes — all from a single vendor. Both companies have an extensive history in the industry and will bring together valuable experience, traditions and complementary, high-quality products."
This is exactly the attitude larger established companies need to maintain their dominant positions. Since its inception in 1960, Dart--as a family owned and operated corporation--has quickly become the leader in the foodservice products manufacturing industry; they have built twenty manufacturing plants worldwide that produce over 600 products and employ a workforce of 7,600 employees. Meanwhile, Solo, established in 1936, has a global presence in the US, Canada, Latin America, and Europe and strong brand recognition, mostly stemming from the iconic red Solo cup. Executives assure consumers that the new corporation will continue to manufacture and market Solo products under the Solo brand, much to the relief of college students every where.
What makes this transaction different from many large Wall Street takeovers is that Dart is a private company and is not responsible to investors for quick profits in order to maintain its stock price. Dart's board sees this as a plus because they believe in Solo as a long term investment that must be well-thought out over a long period of time in order to maximize its returns. As an outsider, knowing whether or not these acquisitions make sense financially is impossible. Without knowing Dart's current debt and equity structures, it is impossible to know whether the company is over-extending itself, a concern when one sees a company make a string of acquisitions like Dart has. Time will tell if that is the case in this situation. However, from a strategy standpoint, I love the moves. Dart is refusing to become complacent. Many once great companies have fallen from the top by accepting the status quo and no longer looking for areas of growth. Instead creating a new department within the company or spinning off a new company altogether, Dart realizes the brand recognition of Solo combined with their quality management and supply chain is a formula for success.
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