Company Not for Sale … for Now at Least

By Seth Daniel

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The Necco Candy Company’s principal owner has decided to pull the manufacturer off the auction block and take another bite into the candy business.

American Capital announced last week that the process to “explore strategic options” for the company has been suspended. American Capital put the candy company on the market – through a New York City broker – last November.

American Capital said in a press release last week that it believes Necco can still be a good return on its investment. A communication to the City from Necco last week indicated that operating revenues were down this year to some degree, which had caused a dip in jobs at the factory.

However, Necco indicated that they’d be stepping things up.

“The opportunity for Necco at this juncture is quite strong; we have made critical improvements to our business, the Original Necco Wafer is being re-launched later this month due to popular demand, and we are developing a robust pipeline of new products to engage lovers of our candy,” said Dave Smith, Necco’s Chief Operating Officer, in the release.

On a side note, the spokesman for Necco at the January City Council meeting, Tony Bretti, has apparently left the company – joining a large group of administrators at Necco that have left over the last year.

Necco’s press release continued its optimistic outlook, stating that they have made changes to their shipping practices, broadened their distribution channels, strengthened partner relationships and made refinements to production.

Smith indicated that those changes, along with support from partners and local officials, would help Necco grow its products.

Union officials were cautiously optimistic, noting that they were happy to see the company stay, but believed that the news came only because American Capital couldn’t get a buyer.

“Right now the good thing is the jobs are there for the people,” said Wayne Matthews, business agent for the Bakery, Confectionery, Tobacco Workers and Grain Millers Union, Local 348. “They plan to return and maintain operations for the next year or two at best. They’ll probably continue a couple years until they get better and then they’ll probably put it up for sale again. It could have been worse. They could have sold to a strategic buyer. I’m not saying that’s out of the picture in the future. They claim they’re doing better now. They’re going to re-launch the Necco wafer and everything. Right now, things look good.”

Sources indicated that throughout Necco’s sale process, there were a number of interested parties looking at the factory and the property. It was speculation that low land prices ruined any potential deal from interested suitors.

“I would think it was that they did not get the asking price for the land,” said one source close to the negotiations. “As a property owner, land is not worth what it was five or 10 years ago.”

Mayor Tom Ambrosino said he was cautiously optimistic as well.

“It is at best temporary good news,” said the mayor. “I’m still wary as to whether they can be viable in such a competitive global environment. The fact they’re going to give it a try for another couple of years is positive news. The unions are interpreting it that way, and I will as well.”

At Monday’s City Council meeting, the matter sparked quite a bit of discussion amongst councillors.

Councillor Tony Zambuto said he was extremely happy when he heard on the television news that Necco was staying.

“My biggest fear was that they would send the manufacturing to China because it’s so difficult to make candy in America,” he said. “I’m still happy that I was a cheerleader for Necco and the TIF agreement. Since Necco got the TIF deal, they’ve paid $5.25 million in taxes. I don’t know where we would have replaced or gotten that.”

The conversation at the Council also touched on the older issue of Necco not complying with the submission of mandated jobs reports to the City and state. Recently, the company provided more than five years worth of missing reports, and those reports seemed to indicate that Necco has – for several years – not created the jobs they promised in the TIF agreement. At the moment they employ 30 Revere residents out of a total workforce of 483. They listed more than 700 employees when they came to Revere in 2003.

There were still varying opinions on that matter.

Some were for a hard stance – making the company comply to the letter of the agreement – and others were for a more relaxed stance – giving the company latitude on their past misgivings.

“Unfortunately this City Council cannot mandate prosperity,” said Councillor Dan Rizzo. “Necco is just one company caught up in the economic downturn. A lot of companies are having a hard time right now. Necco is no different…For the City Council to kick our largest taxpayer while they’re down seems fiscally irresponsible.”

Councillor Ira Novoselsky said that a paperwork issue does not require decisive action.

“We cannot control the economy,” he said. “When they don’t get orders from outside, they can’t produce…Was it a violation? Yes, that was a violation, but was it worth firing someone? It was a paperwork issue.”

Al Terminiello – a candidate for Council and a past president of the Chamber of Commerce – said he felt it was a major issue.

“Everyone knows that if they were to miss five years worth of paperwork, they would be absorbed in fines and penalties,” he said. “I think something more should have happened to them than a slap on the wrist and sending them on their way.”

Councillor George Rotondo said Necco needed to be held accountable.

“The signing of an agreement was not just about revenue,” he said. “Part of the reason for them getting a tax break is that they provide jobs. By their own statements they are in decline on jobs. It is not the City’s responsibility to bail out a multi-billion dollar company.”

In the end, Councillor Bob Haas provided a middle of the road, honest take on the issue.

“There’s a reason they didn’t sell and decided to stay,” he said. “The reason was there are no buyers. What are we foolish here? If they had a buyer who knows what would have happened? It’s a free market, so good luck to them. We’re happy they complied with the contract finally and now let’s move on…I don’t know why this is before us right now, other than for politics.”

In a side issue, Necco will appear before the state Office of Business Development for a hearing on April 26th. At that hearing, Necco and several supporters from the unions and City government are expected to make a case for the company keeping its TIF agreement. State officials are investigating the company for jobs compliance.

A final decision on the matter will come in June.