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Offer for Wolfgang lower than bank's lien, records say

By , - Last modified: July 20, 2012 at 10:07 AM

A buyer has emerged for the assets and operations of York County-based Wolfgang Candy Co. Inc. with an offer of $1.5 million, but will the deal end up being sweet enough?

Wolfgang filed for Chapter 11 bankruptcy protection in March after a restructuring process began the previous fall.

Divine Serendipity is an acquisition firm that wants to buy the midstate confectioner's operations and continue to do business under the Wolfgang name, Divine Serendipity's President and CEO William "Wayne" Sellers said.

In fact, the chief executive of the suitor is eyeing a "buying spree" in the candy world by acquiring more firms. But at the same time, Sellers said, he's not going to pay too much for any company.

M&T Bank holds a lien on Wolfgang of more than $4 million, according to recently filed court documents. That leaves a lot of ground between the offer and what the bank is owed.

M&T does not comment on the details of client relationships, spokesman Phil Hosmer said.

Wolfgang's restructuring process had included a planned partnership with another company, according to previous statements. But it said Buffalo, N.Y.-based M&T did not approve the partnership.

Lacking the approval, Wolfgang said it had no choice but to file for bankruptcy protection. The company has not named that potential partner.

Since filing for bankruptcy protection, Wolfgang has been ahead of sales, expense and cash-management expectations as set forth by the court and the firm's leadership, according to a Wolfgang statement about the possible sale.

The company's court filing from earlier this month requests the sale, which would retain operations in North York, according to the company.

Wolfgang is thrilled to have found an interested buyer committed to keeping the business in York County and growing the brand and manufacturing in the community, even though the process has not been the chosen route, Wolfgang President and CEO Benjamin McGlaughlin said.

"It was our goal the whole time to restructure outside of bankruptcy," McGlaughlin said.

He also said the partner lined up before the bankruptcy protection filing was a different entity than Divine Serendipity.

The cash payment of $1.5 million offered by Divine Serendipity would go to Wolfgang's bankruptcy estate and would be distributed to debt holders in order of priority, according to an offer letter made public through the court filing July 6.

Beyond that, the offer specifically excludes assuming liabilities if Divine Serendipity ends up buying substantially all of Wolfgang's assets, according to the filing.

Wolfgang has been a longtime, major player in the fundraising world and had delved into private label production and some retail distribution channels.

It listed 77 hourly and 13 salaried employees in a petition accompanying its bankruptcy filing.

Sellers also is president and CEO of Birmingham, Ala.-based Pasquale Food Systems Inc. He said he acquired the Pasquale Pizza & Pasta restaurant chain, with locations in the Midwest and South, about six years ago.

Divine Serendipity had started negotiations to acquire a different candy firm before the Wolfgang opportunity arose, Sellers said, and those talks continue.

The industry has a lot going for it, he said.

"I don't know anyone who does not like chocolate," he said. "I eat it every day."

In addition, there are great people at Wolfgang, and the product and brand constitute a "sleeping giant" with significant potential to do well on a much wider stage, Sellers said.

The fates of about 100 jobs are on the line as well, he said.

"We like to make money like everybody else, but we also like to make money doing the right thing," Sellers said.

Still, a buyer can't pay too much for a business and not leave adequate capital at the ready, he said.

Going forward, each side has its opinions about what the price should be, and they are working to come to an agreement, Sellers said.

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