MCDERMOTT COLUMN: Local paper mill supplier sold

  • John McDermott
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  • Posted: Monday, January 16, 2012 12:01 a.m.
    UPDATED: Sunday, March 18, 2012 7:13 p.m.
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A North Charleston-based paper mill supplier has inked its last deal as a standalone company.

Carolina Starches was sold last week to Penford Corp., a Colorado maker of food ingredients, for $5 million in cash. The buyer also assumed $3.5 million of outstanding debt.

The acquired business extracts industrial starches from potatoes, corn and tapioca that are used in the papermaking process. It has manufacturing plants at 7675 Southrail Road in North Charleston and in Pennsylvania. Annual sales total $25 million.

The business was a natural fit for Centennial, Colo.-based Penford, said CEO Tom Malkoski.

"The addition of Carolina Starches offers strategic and operational benefits to both our specialty industrial products and food ingredients businesses," Malkoski said in statement. "This acquisition should result in enhanced customer service and technical support, as well as broaden our portfolio of modified starches, and lead to improvements in our supply chain functions."

Ben Cheatham, Dwight Carlson and Steve Brower were the previous owners of Carolina Starches. Each received 27,500 Penford stock options as part of the deal, according to a filing with the Securities and Exchange Commission.

The sale first was announced in November, when the financial terms were sweeter. At that time, Penford had agreed to pay $6 million in cash for the business and issue 55,000 options to each of the sellers.

Officials from the two companies could not be reached Friday for comment.

Cheatham said in a November statement that he and his partners were "elated about joining the Penford team as we see this as an exciting opportunity to continue our aggressive growth strategy, only on a larger platform of success. This acquisition builds on a strong geographical presence in North America and improves the gateway to service international opportunities."

Carolina Starches traces its roots to the U.S. arm of a Dutch company called Avebe BA that expanded into the region in mid-1990s. Local management bought out the North Charleston operation in 2004, developed new products and in April 2010 purchased a potato-starch manufacturer from BASF.

Reach John P. McDermott at 937-5572.