Minnesota food distributor Schwan's being sold to South Korean firm in $1.8 billion deal

Schwan's Co., the Minnesota food distributor known for the home deliveries made by its distinctive gold trucks, is being sold to South Korea's largest food company.

CJ CheilJedang, or CJCJ as it is known, will pay $1.8 billion for an 80 percent stake in Schwan's and gain control of Schwan's businesses that serve restaurants, groceries and other retailers.

The Schwan family, descendants of founder Marvin Schwan who started the company in Marshall in 1952, will continue to own 20 percent, and run its home delivery service.

The deal was announced Thursday afternoon Korea time, late Wednesday in Minnesota, following a meeting of CJ's board of directors. The companies said Schwan's would keep its name, its corporate office in Bloomington and its main operations in Marshall.

"This was the most important part of the decision for the family," said Paul Schwan, son of Marvin Schwan and a member of the Schwan's board.

Schwan's informed its employees Wednesday night of the sale and will hold a company meeting Thursday morning to share details.

"Obviously there's a certain amount of nervousness with a sale," Dimitrios Smyrnios, the company's chief executive, said Wednesday night. "We are going to operate business as usual in Marshall, business as usual in Bloomington, business as usual in Minnesota."

Smyrnios will continue to lead the day-to-day operations of Schwan's after the deal closes. He said other Schwan's executives will also stay.

Schwan's has about $3 billion in annual sales and offers a variety of frozen and ready-made products, including Red Baron, Freschetta and Tony's pizzas, Mrs. Smith's pies and Edwards desserts. It also has food service business that sells to schools, hospitals and other institutions.

"We want to grow. This is not a cost-cutting exercise," Smyrnios said.

The deal, which has been in the works since summer, is the largest acquisition yet by CJCJ, which is the biggest unit of the CJ Group, a conglomerate of food and related companies that was originally part of the Samsung Group. Started in 1938 by Lee Byung-chul, CJ split from Samsung Group in 1997 and is now led by Lee Jay-hyun, the oldest grandson of Lee Byung-chul.

With $14.5 billion in sales last year, CJCJ is the largest food producer in South Korea and distributes under many brand names there and in other parts of Asia. It has a growing presence in U.S. stores, chiefly selling rice, noodles and Korean sauces and spices under the CJ, Annie Chun, Bibigo and Omni labels.

The company has been trying to build its U.S. scale for about a decade. In addition to selling food, the company runs the Bibigo chain of Asian fast-food restaurants in California.

In a statement, CJCJ said it expects to gain scale and cost efficiencies in U.S. stores with the Schwan's acquisition. Executives said they also hope Schwan's distribution system will bring their Korean products into more groceries and restaurants.

"CJ will accelerate the globalization of Korean food culture," Shin Ho-kang, chief executive of CJCJ, said in a statement.

Schwan's will become a unit of CJ Foods America Corp., the U.S. subsidiary of CJCJ, when the deal closes early next year.

With Schwan's, CJCJ will pick up 17 food manufacturing facilities and 10 distribution centers across the United States. CJCJ currently has five U.S. manufacturing and distribution sites.

"Food is extremely important to them," Smyrnios said of CJCJ. "They are operationally excellent, and they have big aspirational goals."