Host America Corporation has reached agreements to sell its two foodservice business units to groups headed by the current managers of those units. The sales will generate approximately $3.7 million for the company, which will be used for working capital, to repay corporate debt and pay down other short-term debt collateralized by the assets of the business units to be sold.
Lindley Food Service will be sold to its former owners, from whom Host acquired the business in 2000. The group is headed by Gilbert Rossomando, a member of Host America’s board of directors. The purchase price is approximately $2.5 million, subject to closing day adjustments.
Host America Corporate Dining will be sold for $1.2 million, subject to closing day adjustments, to a group headed by Timothy Hayes, who has headed the business unit for Host America for the past ten years. The final price will be determined based on inventory and sales values in relation to historic values. Host America will retain the receivables and payables of this unit after the sale.
Both sales are subject to approval by Host America’s shareholders and shareholders will also be asked to approve a new name for the company. Host America will then focus entirely on the energy management business, including electrical contracting and energy conservation products and services. The company recently launched EnerLume-EM a new light controller that reduces energy consumption in fluorescent lighting systems in retail establishments, warehouses, and other large facilities without reducing perceived luminosity.
“The decision to sell our food service units to their current management teams ensures financial stability for those businesses and provides maximum customer satisfaction. Once these sales are complete it will permit the company to concentrate 100 percent of its resources on growing the Energy Management business,” says David Murphy, president and chief executive of Host America Corporation. Murphy noted that combined with a recently completed private sale of approximately $750,000 in stock and warrants to accredited individual investors, the three transactions will raise approximately $4.4 million in new capital for the firm. “As we use this capital to reduce both short- and long-term debt, the company is increasingly being prepared to move ahead aggressively in the Energy Management arena,” he says.
The company retained the services of a nationally known valuation firm to determine that the purchase price was a fair price for the sale of these two units.