Bret Keisling discusses the recently announced sale of CLIF Bar to Mondelēz International. Employee owners will split 20% of the $2.9 billion price, which will result in the termination of its ESOP. It's a bold strategic move to increase sales and market share, but also shows a potential downside of EO.
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Mini-cast 191 Transcript
[00:00:00] Bret Keisling: Welcome to the ESOP Mini-cast. Thank you so much for listening. My name is Bret Keisling, and as it says on my business cards, I'm a passionate advocate for employee ownership.
[00:00:16] This week, CLIF Bar, a 20% ESOP, announced that it was being acquired by Mondelēz [International] for just under $3 billion. The sale is expected to close in the third quarter of 2022.
[00:00:29] If you're not familiar with Mondelēz, you certainly are aware of their 40 brands. CLIF Bar joined such storied companies as Cadbury, Chips Ahoy, Clorets, Halls Mentho-Lyptus, Honey Maid Graham Crackers, Oreo, Philadelphia Cream Cheese, Ritz Crackers, the Sour Patch Kids, Tang, Triscuit, Wheat Thins to name just a few.
[00:00:51] Setting aside employee ownership for a moment, this is obviously a bold strategic decision by CLIF Bar to accept an offer that is valued significantly higher than its most recent valuations. And there's no doubt that the 1,200 employees will do quite well, dividing, approximately 580 million pre-tax dollars based on its 20% interest. The average payout would be approximately $480,000 for employees. Of course, many will receive far less, but no doubt that several hundred employees are going to become millionaires when the transaction closes.
[00:01:23] In that sense, it's fair to consider CLIF Bar as an ESOP success story. But honestly, I don't think it's good for employee ownership as a whole. When I heard about the sale, I thought back to November 2019, when New Belgium Brewing announced its sale to an international conglomerate. Sometime after that sale was announced, Employee Ownership News curated a number of viewpoints that ran the gamut of reactions.
[00:01:48] My reaction at that time was the opposite of my reaction to CLIF Bar's sale. New Belgium had essentially run out of options for capitalization and had no way to continue without taking such a drastic step. Media reports suggest that in CLIF Bar's case its founder, who with his wife are the majority owners, decided it was time for them to move on and the company's acquisition seems designed primarily to allow CLIF Bar to increase market share.
[00:02:16] If your view of employee ownership is that it's a short-term vehicle to motivate employees, and in fairness, reward them, then this presumably fits right in with that perspective. But many of us, myself included, look at employee ownership in its purest form as something that can be transformative for our businesses, communities and country when it has the long-term view of sustainability as an employee-owned company.
[00:02:41] In that sense, Clif decided to pursue market share and profitability without regard for employee ownership. And that's their right. But as I read up on the sale, certain things surprised me.
[00:02:51] For example, I learned that in 2021, Clif eliminated 125 jobs in what was described by the company as a major push to increase profitability. I've been attending EO and ESOP conferences since 2009 and I don't recall ever being at a presentation where employee-owned companies were reminded that slashing jobs was a positive strategy for profitability. To the contrary, the best employee-owned companies that are celebrated throughout EO and ESOP communities drive some of my favorite statistics, including the fact that during the pandemic employee-owned companies were four times less likely to have layoffs and three to four times less likely to reduce salaries. This is the exact opposite of Clif's strategy.
[00:03:34] As a consumer CLIF Bars have been my go-to power snack when I've been hiking or even during my numerous drives across the United States. I purchased CLIF Bars because it was partially employee owned. I've said many times on the podcast that I think it's important that we support employee-owned companies wherever and whenever we can. But the fact of the matter is I've never talked about Clif much on the podcast because they never really exhibited a strong commitment to employee ownership itself as EO advocates tend to define it. Employee ownership wasn't particularly promoted on their website or on social media and I don't recall them having much of a presence at all at any of our conferences.
[00:04:13] The unfortunate thing for those of us who believe sustainability should be a critical component of employee ownership is the sale of CLIF Bars to Mondelēz reinforces a skepticism about the viability of employee ownership, that at some point an offer will come that will constitute a big payday for many, and that alone will justify a sale.
[00:04:33] At a time when employee ownership is engaged in numerous discussions about what EO means during increased attention from private equity, the sale of CLIF Bars is a big win for the transactionists who are not concerned with the sustainability of employee ownership.
[00:04:47] Nonetheless, so that I can end this Mini-cast on a positive note, 1,200 employee owners will do very well in the sale. And as I said earlier, probably a couple of hundred employees will become millionaires. That makes me very happy.
[00:05:00] On the other hand, with money in the bank, they'll no longer be employee owners. And that makes me sad.
[00:05:06] With that we'll wrap up today's episode of the Mini-cast. We're going to include in our show notes, some links to articles about the sale, including someone in the EO space who has a different view than I do. I'd love to hear your thoughts, whether you agree or disagree. You'll find out how to reach out in just a moment.
[00:05:22] Thank you so much for listening. This is Bret Keisling. Be well
[00:05:26] Bitsy McCann: We'd love to hear from you. You can find us on Facebook at EO Podcast Network and on Twitter @ESOPPodcast. This podcast has been produced by Bret Keisling for the EO Podcast Network, original music composed by Max Keisling, branding and marketing by BitsyPlus Design, and I'm Bitsy McCann.
Standard Disclaimer: The views expressed herein are my own and don't represent those of my own firms or the organizations to which I belong. Nothing in the podcast should be construed as guidance or advice of any kind in any field and the fact that I mentioned an organizational website or an advocate or a company on a podcast does not reflect an endorsement, but if you've heard your name or your group's name mentioned on this podcast, I'd love to have you come on and talk about it yourself.
A note on the transcript: This transcript was produced by Descript, an automated transcription service. While it has been reviewed by The EsOp Podcast, we can not guarantee the accuracy of the transcription. Please refer to the original audio when citing sources.