RECENT DIVESTITURESBack to Divestitures
 |
Paragon Trade Brands, Inc., headquartered in Norcross, Georgia, is the leading manufacturer of private label infant disposable diapers in the United States and Canada. Paragon manufactures a line of premium and economy diapers and training pants which are distributed through leading mass merchandisers, grocery stores, warehouse clubs and drugstores. Paragon also established international joint ventures in Mexico, Argentina, Brazil and China for the manufacture and sale of infant disposable diapers and other absorbent personal care products. The Paragon investment opportunity originated through Wellspring’s relationship with the distressed investment and bankruptcy communities. Paragon filed for Chapter 11 bankruptcy in January 1998 after an adverse judgment in a patent infringement lawsuit with The Procter & Gamble Company and subsequently negotiated settlement agreements related to the infringement of certain patents with Procter & Gamble and Kimberly-Clark Corporation. Working with the Company and its creditor constituencies, Wellspring negotiated a consensual plan of reorganization for Paragon to facilitate its emergence from bankruptcy. The Paragon investment opportunity appealed to Wellspring because of the Company’s commanding market share in private label diapers and its excellent relationship with the leading retailers. Wellspring also believed that Paragon was underperforming during its bankruptcy for several reasons. From the onset of the transaction, Wellspring played a significant role restructuring the Company for its future success, including: (i) augmenting Paragon’s senior management team; (ii) guiding the Company through the introduction of its Destination Store Brand Strategy starting with White Cloud at Wal-Mart, which grew from its inception in 1999 to over $150 million of sales in 2001; (iii) focusing Paragon on line extensions, including highly profitable training pants; (iv) rationalizing capacity in 2000 to generate strong cash flows in the early period of the post Chapter 11 turnaround; (v) exiting the unprofitable feminine care business; (vi) restructuring the Company’s foreign joint ventures and negotiating agreements that provided a clear path to liquidity in these formerly captive investments; and (vii) providing new focus on Paragon’s intellectual property strategy, including a significantly increasing in R&D spending and endorsing a new non-confrontational strategy regarding competitor and industry patents. The Company’s financial results improved dramatically. During Wellspring’s ownership period, revenue increased from $498.7 million to $699.5 million, representing a compound growth rate of 18.4%, and EBITDA grew from $13.5 million to $127.3 million, representing a compound growth rate of 207.4%. In January 2004, Wellspring sold Paragon to Tyco International Ltd. "Wellspring’s business and financial acumen allowed Paragon to successfully emerge from Chapter 11. Under their ownership we experienced the best results in our Company’s history. They provided the experience to help us complete our plan to streamline our operations, as well as the capital and expertise to help Paragon achieve its expansion goals. Wellspring was an excellent partner and provided us with the financial stability that we needed to maintain our market leadership position." Mike Riordan |