Pearson Candy Co. sold to private equity firm

Pearson Candy Co., maker of such Minnesota favorites as the Salted Nut Roll and the Nut Goodie, has been sold to a private equity firm in a deal that could bolster the venerable St. Paul confectioner's business.

Greenwich, Conn.-based Brynwood Partners announced Monday that it will buy Pearson for an undisclosed price. It plans to keep operating the 102-year-old candy maker's W. 7th Street plant, which employs about 170, and use Pearson as a vehicle for future candy acquisitions.

Larry Hassler, Pearson's owner since 1985, began shopping Pearson last year as he contemplated retirement. Now 65, Hassler took over the firm when it was in financial ruins. He stabilized it, and then steadily grew revenue and profits, building a national market in the process.

While Pearson has been "an absolute passion," Hassler said, "I have taken the company as far as I can without acquisitions and massive advertising. ... It needs new ideas, new blood and new products."

Brynwood, which has other candy industry investments, has more capability to boost ad spending and increase Pearson's product breadth, Hassler said. "They want to use this as a base plant to bring in more production capacity."

Hassler will remain with the company in a consulting role during the ownership transition. Michael Keller, former chief marketing officer at Edina-based International Dairy Queen, will become Pearson's president and chief executive officer.

Brynwood Partners manages over $500 million in client funds and has done several consumer products deals in recent years, including the 2007 purchase of the classic Turtles candy brand from Nestle.

Private equity firms like Brynwood usually hold brands or companies for several years and then resell them after increasing their value.

At Pearson, "Our plan is to operate the business as it's currently configured and hopefully -- by adding fresh capital and new ideas to the business -- to grow it in the coming years," said Henk Hartong III, Brynwood's senior managing partner and Pearson's new chairman.

"We admire what Larry Hassler has done with the business and think we can build on the great work he has done," Hartong said. Brynwood sees Pearson as "a great platform for additional [candy] acquisitions."

Bob Boutin, of the suburban Chicago-based candy consulting firm Knechtel Laboratories, said Pearson is "very stable, very well respected and very conservatively run."

Indeed, Hassler said he passed on acquisitions over the years because of his financial conservatism.

Hassler, who grew up in Pennsylvania about an hour's drive from candy kingpin Hershey, became chief financial officer at Pearson in 1980, during a difficult period for the company.

The Pearson family had sold the business in 1969 to a big baking company unfamiliar with the candy trade. It unloaded Pearson's in 1979 to a confectionery partnership that didn't make things any better.

With Pearson facing bankruptcy or closure in 1985, Hassler and another Pearson employee, Judy Johnston, bought the company -- at a minimum cost -- at the suggestion of its largest creditor. Johnston sold her minority stake in November in anticipation of Pearson's ultimate sale, Hassler said.

Pearson spent five to eight years righting the ship before the company began growing again, Hassler said. Since then, "just about every year, revenues have been growing and earnings have been good."

Pearson's core market is Minnesota, the Dakotas, Wisconsin and Iowa, though it also has strong sales in Utah and Colorado. While Nut Goodie is a regional candy bar, Pearson's Salted Nut Roll and its chocolate-covered mints compete nationally with Hershey's Payday bar and its York-brand mints.

Pearson's revenue is below $100 million, and Hassler said candy makers below that level have difficulty surviving without more products to offer.

"The biggest question I get from customers is "what else do you have, what do you have coming?" Hassler said.

Pearson has plenty of capacity to make more candy at its St. Paul plant, he said. "We could double throughput without adding a brick."

Mike Hughlett • 612-673-7003