Engine, generator and lawn-and-garden manufacturer Briggs & Stratton has filed for Chapter 11 in a bankruptcy court in Missouri. The company has more than $1 billion in debt. Briggs & Stratton has entered into a $550 million definitive stock and asset purchase agreement with KPS Capital Partners, which has a 20-year history focused on developing manufacturing companies. Under the terms of the agreement, an affiliate of KPS formed for purposes of this transaction has agreed to acquire substantially all of the company's assets and assume certain customer, employee and vendor liabilities, and it would act as the stalking-horse bidder through a court-supervised sale process (known as a Section 363 process).
The sale agreement is subject to higher or better bids from other potential purchasers. The acquisition will include equity of foreign subsidiaries, KPS said.
To facilitate the sale process and address its debt obligations, the company has filed petitions for a court-supervised voluntary reorganization under Chapter 11 of the U.S. Bankruptcy Code. The company has also obtained $677.5 million in debtor-in-possession financing, with $265 million committed by KPS and the additional $412.5 coming from the company's existing group of ABL lenders.
Following court approval, the DIP facility will ensure that Briggs & Stratton has sufficient liquidity to continue normal operations and to meet its financial obligations during the Chapter 11 process, including the timely payment of employee wages and health benefits, continued servicing of customer orders and shipments, and other obligations.
"Over the past several months, we have explored multiple options with our advisors to strengthen our financial position and flexibility,” said Todd Teske, Briggs & Stratton's chairman, president, and CEO. “The challenges we have faced during the COVID-19 pandemic have made reorganization the difficult but necessary and appropriate path forward to secure our business. It also gives us support to execute on our strategic plans to bring greater value to our customers and channel partners. Throughout this process, Briggs & Stratton products will continue to be produced, distributed, sold and fully backed by our dedicated team.”
KPS also announced that it has entered into an agreement in principle with the United Steelworkers of America with respect to a new collective bargaining agreement for Briggs & Stratton hourly employees represented by the union at the company’s manufacturing facilities in Wisconsin. The new CBA, an exclusive agreement between KPS and the USW, will become effective upon completion of the acquisition.
Wells Fargo has agreed to continue to provide floorplan financing to support Briggs & Stratton’s customers under KPS’ ownership, and a syndicate of banks including Wells Fargo, Bank of America, BMO Harris Bank and PNC Business Credit has committed to provide exit financing to Briggs & Stratton. The financings are subject to completion of the acquisition and customary closing conditions.
“We are very excited to acquire Briggs & Stratton, a legendary brand in American manufacturing and the leading company in its industry,” said Michael Psaros, co-founder and co-managing partner of KPS. “Briggs & Stratton enjoys a leading market position, scale, a global manufacturing footprint, world-class design and engineering capabilities, and a portfolio of industry-leading products sold under iconic brand names. We intend to capitalize on the company’s many attractive growth opportunities and to support its already substantial investment in research and development, technology and new product development. KPS intends to grow the new Briggs & Stratton aggressively through strategic acquisitions.
“KPS is committed to the expeditious acquisition of Briggs & Stratton to provide certainty of outcome and confidence in the new company’s future for all of its stakeholders, including customers, employees and suppliers. The company and its stakeholders will benefit from KPS’ demonstrated commitment to manufacturing excellence, continuous improvement, global network, access to capital and significant financial resources. The new Briggs & Stratton will be conservatively capitalized and not encumbered by its predecessor’s significant liabilities.”
Briggs & Stratton, despite its iconic stature as a 112-year-old company, has struggled with declining sales in recent years. The power of mass merchandisers such as Home Depot, Lowe’s and Walmart affected sales. A major customer, Sears, went bankrupt in 2018. It faces significant competition from Honda Motor Co. and Kawasaki Heavy Industries Ltd., the company said.
Briggs & Stratton was founded in 1908. It manufactures gasoline engines for lawnmowers, electrical generators, pressure washers, turf care and jobsite products. It has manufacturing and assembly plants at eight U.S. locations as well as in China, Australia and Brazil. It reported $1.84 billion in sales for 2019. Its brands include Briggs & Stratton, Simplicity, Snapper, Ferris, Vanguard, Allmand, Billy Goat, Murray, Branco, and Victa. Briggs & Stratton products are designed, manufactured, marketed and serviced in more than 100 countries on six continents.
On the positive side, the company increased its commercial sales 13 percent in 2019 and continues to develop innovative products such as its lithium-ion Vanguard battery system, which, Teske noted in a statement, “is another step toward diversifying our business and driving greater growth in commercial markets.”
