GRAND HAVEN — Zelenka Farms has emerged from bankruptcy under new ownership and a new name.
After filing for Chapter 11 bankruptcy in mid-July, the Irving, Texas-based company with major operations in Grand Haven sold the majority of its assets in a $15 million sale to Gardens Alive Inc., a Lawrenceburg, Ind.-based nursery and garden products retailer.
Zelenka Farms, a producer and distributor of container-grown shrubs, trees and other plants, was previously owned by Insight Equity, a Southlake, Texas-based private equity firm.
Going forward, Zelenka will be rebranded as Gardens Alive as a “fresh start” for the company, CEO Eric Ek said in an interview with MiBiz.
Ek plans to stay on with Zelenka Farms through the transition process.
Gardens Alive plans to examine the assets in each of the six locations it acquired in the transaction, including a large operation in Grand Haven, and determine their viability, Ek said.
The company expects to retain the majority of Zelenka’s 1,600 employees, particularly the roughly 300 employees that work at its Grand Haven farm, he added.
“That’s a very well-run operation, it always has been, and it’s the largest of all the farms, so there’s going be hardly any changes at the Grand Haven location,” Ek said.
Zelenka Farms generated approximately $130 million in sales last year.
Gardens Alive founder and CEO Niles Kinerk created LM Farms LLC, which served as the stalking horse bidder — an entity appointed by a distressed company to make an initial offer during the bankruptcy auction — to complete the acquisition of Zelenka.
Gardens Alive beat out several other bidders, Ek said.
For Kinerk’s part, the deal for Zelenka fits with previous acquisitions the company has made and its experience in the nursery business.
“The opportunity to purchase Zelenka Farms’ assets and to continue the turnaround that is well underway is exactly the opportunity that we look for,” Kinerk said in a statement regarding the transaction.
Zelenka entered bankruptcy in mid July citing an “unusually rainy” spring season that resulted in lower sales than the company expected, which compromised its ability to pay down a $28 million revolving loan to PNC Bank, as MiBiz previously reported.
The recent trouble follows a decade of financial struggles for Zelenka, which first declared bankruptcy in 2003 after losing two of its major customers, Kmart and Target. At that time, Zelenka was based solely in Grand Haven and was purchased by The Berry Family of Nurseries of Oklahoma.
In 2010, the company was acquired when Insight Equity purchased a controlling stake in BFN operations, the parent company of The Berry Family of Nurseries.
Each time the company was acquired in the past, its debt burden also rolled over, a source familiar with the matter told MiBiz for a previous report.
Ek confirmed that successive debt had hindered the company’s growth and ultimately led to its second bankruptcy.
“It’s going to be family-owned as opposed to the past where we’ve been corporate-owned or investor-owned,” Ek said. “Investment firms really do want to grow and they want to build up the business and sell it. In this case, we just had too much debt.”
Unlike before, the company will operate with a clean slate, free of debt, and with a management philosophy that champions slow-and-steady growth, according to Ek.
“It’s very hard to make a profit in an industry that’s cyclical if you have a lot of debt,” Ek said. “Sometimes you end up chasing growth just for a small profit, whereas if you don’t have debt, you don’t have to grow at all costs. I think that’s really going to be the philosophy: slow, steady growth, protect the business and we don’t need to grow tremendously.”
The company also plans to leverage its large variety of plants to access new retail outlets, such as independent garden centers, adding diversity to its customer base, which primarily includes big-box retailers like Meijer and Home Depot.
“It’s a channel that we had given up on a few years back, but we’re going to go back into,” Ek said of the independent garden center market.