Harlan Bakeries acquiring facility from Krispy Kreme

by Josh Sosland
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AVON, IND. — Harlan Bakeries, Inc., a wholesale baking company specializing in bagel production, has entered into a definitive agreement to acquire a mix manufacturing and distribution plant in Effingham, Ill., from Krispy Kreme Doughnut Corp.

The transaction was detailed in a Form 8-K submitted by Krispy Kreme Dec. 21 in a filing with the Securities and Exchange Commission.

According to the S.E.C. filing, Harlan paid $11.8 million in cash for the facility. The company has the option to purchase some or all of the inventory located at the facility.

Krispy Kreme said the transaction is expected to close in January, subject to normal closing conditions and the consent of its lenders. Krispy Kreme said it will use net proceeds from the transaction to prepay debt under its secured credit facilities.

Avon-based Harlan Bakeries has expanded rapidly since first introducing a line of bagels in the Indianapolis market in 1991. The company’s products, bagels, bagel chips, mini bagels and health bars, are distributed through much of the Midwest. The company expanded its capacity in 1996 to include a frozen dough line to supply bagels for Einstein/Noah Bagel Corp. In 1999, the company added a production line for McDonald’s bagels.

More recently, Harlan in January 2000 acquired Kyger Bakery Products, Inc., a producer of shelf stable pies and cakes. The Kyger baking plant is located about 50 miles north of Avon, near Lafayette, Ind.

Representatives from Harlan were unavailable for comment on the agreement to acquire the Effingham mix plant.

Krispy Kreme, based in Winston-Salem, N.C., substantially reduced the carrying value of the Effingham facility earlier in 2007 through an impairment write-down. As a result, the transaction is not expected to have a material effect its financial results. In the second quarter, the company charged $10.6 million in connection with its decision to divest the Illinois plant. The company took another $11.5 million in charges related to underperforming stores, including stores that have been closed or are likely to be closed.

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