Atlantic Canada’s largest family-owned bakery is buying the recently closed Koffee Kup Bakery of Burlington and subsidiary Vermont Bread Company of Brattleboro.
Mrs. Dunster’s, a New Brunswick distributor of baked goods across the Maritime Provinces and in Maine, announced its purchase Thursday just hours after receiving approval for incentive money from the Vermont state government to reopen the nearly century-old business.
“We are hopeful to have this completed within a few days,” Mrs. Dunster’s co-CEOs Blair and Rosalyn Hyslop said in a statement, “to quickly get employees back to work and products back on the shelves.”
About 150 Koffee Kup workers in Burlington and 100 Vermont Bread workers in Brattleboro were surprised a month ago to find their manufacturing and distribution plants abruptly shuttered without explanation, leading a court to appoint a receiver to sell the assets.
Amid several bidders, the Massachusetts-based East Baking Co. sprang to the forefront earlier this month when it requested and received initial state authorization for up to $2.4 million in Vermont Employment Growth Incentive money to restart the plants.
But for at least a week, receiver Ronald Teplitsky of New York’s Next Point LLC appeared close to awarding Koffee Kup to the Canadian company.
“We understand many parties have looked at the assets of Koffee Kup, us included,” Mrs. Dunster’s co-CEO Blair Hyslop said last Friday in a statement before declining further comment.
On Thursday, the Vermont Economic Progress Council, having approved incentive money for East Baking on May 6, offered Mrs. Dunster’s up to $1.8 million through the same program.
“While the closing of Koffee Kup and Vermont Bread is something nobody wanted to see, we are encouraged that multiple buyers have quickly emerged to try and revive these Vermont brands,” the council said in a statement. “Given the reported financial troubles these brands had experienced over the last few years, both companies approved by VEPC are now able and interested in this purchase.”
Within hours, Mrs. Dunster’s confirmed the acquisition.
East Baking, for its part, offered a message of retreat.
“We find it highly unusual that a company that is heavily subsidized by the Canadian government would be subsidized by the people of Vermont to buy an iconic U.S. brand,” East Baking spokesperson Jeff McCarroll said in a statement. “We are happy for the employees going back to work and sad for the ones who will not.”
In a field of bidders ranging from descendants of the company’s founder to a liquidator, the sale of a Vermont outfit valued at $75 million is big for a Canadian company with annual sales of about $10 million.
One industry insider likened the monthlong Koffee Kup saga to the stuff of a telenovela, but it’s a rare bump in an otherwise smooth nearly century-old history that began when founder Cherie Roberge came to Vermont from Canada in 1925 to deliver homemade bread and rolls in a horse-drawn wagon.
The American Industrial Acquisition Corp., a New York-based investment firm whose website says it “acquires underperforming and non-core manufacturing and distribution businesses,” purchased Koffee Kup on April 1 and agreed to provide up to $2.5 million in financial support.*
“The company sought a financial partner to accelerate its next phase of growth and profitability,” its financial adviser said in a statement at the time. “AIAC … is well positioned to continue the expansion of KKB, capitalizing on operational improvements and driving growth momentum forward.”
But three weeks later, the investment firm decided to close the business, just after lenders at KeyBank received an email from Koffee Kup’s outgoing CEO suggesting a sale to “a third party is much less messy and the bank will earn out more at the end than the best liquidation scenario,” according to a copy obtained by VTDigger.
AIAC instead shuttered everything April 26.
“For each of the last four years, Koffee Kup has suffered substantial financial losses and was unable to find a way out of their troubles,” it said in a statement. “In the last six months, the company was unable to find a new investor/operator who was willing to commit the resources necessary to bring the company back to health.”
The Vermont Department of Labor didn’t receive notification of the closure until the day it happened, even though state law requires advance notice. That spurred an employee to file a proposed $5 million class-action lawsuit alleging the company didn’t give proper notice to its employees.
Workers have also complained that the company paid out accrued vacation and sick time into their accounts after closing, but then the money was electronically retracted from their accounts because of a disagreement about who’s responsible for covering such obligations.
“If they didn’t want to pay us, why would you give us the money and then take it away?” former staffer Gary Pasquale Jr., who saw his account drop from $5,000 to a $300 deficit, has told reporters. “We all have bills that need to be paid.”
Vermont Attorney General TJ Donovan filed court papers last week supporting an emergency call for the receiver and bank to pay employees nearly $800,000 in accrued paid time off.
“Koffee Kup employees earned these wages and this money should be paid back to them,” Donovan said this week in a statement.
KeyBank has filed its own lawsuit in Chittenden Superior Court, claiming Koffee Kup owes it more than $7 million in loans.
“Lender seeks the appointment of Ronald Teplitsky as receiver,” it requested, noting his experience in overseeing corporate liquidations and company restructuring.
KeyBank has since said it cannot comment “for legal and client privacy reasons,” spokesperson Karen Crane said.
Correction: An earlier version of this story misstated the defendant in KeyBank’s lawsuit.
*Editor’s note: AIAC has been described as the buyer of Koffee Kup Bakery by court-appointed receiver Ronald Teplitsky’s counsel, Nolan Heller Kauffman LLP, and Koffee Kup’s financial adviser, G2 Capital Advisors. However, AIAC said in June that it served only as a transaction broker for a third-party buyer it has declined to identify.