Holberg Industries, Inc.

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Holberg Industries, Inc.

545 Steamboat Road
Greenwich, Connecticut 06830
U.S.A.
Telephone: (203) 422-3000
Fax: (203) 661-5756
Web site: http://www.holberg.com

Private Company
Incorporated: 1986
Employees: 20,225
Sales: $9.3 billion (1998 est.)
NAIC: 42241 General Line Grocery Wholesalers; 81293 Parking Lots and Garages

Holberg Industries, Inc., a holding company, was one of the largest privately held companies in the United States. The company is the majority shareholder in two operating companies which, through acquisitions, became leaders in their respective fields: parking management and foodservice distribution. Holberg owns 77 percent of APCOA/Standard Parking, which, in 2000, managed more than 1,800 paid parking facilities containing over one million parking spaces in over 200 cities in the United States and Canada. Holberg also owned 93 percent of AmeriServe Food Distribution, which filed for bankruptcy in 2000 and was sold by the end of the year. Cofounder John Holten owned 66 percent of Holberg Industries and Orkla A/S, a Norwegian consumer products company, owned the rest.

Starting a Company: 1986–89

During the first half of the 1980s, Norwegian-born, Harvard-educated John Holten worked in New York City at DnC Capital, a merchant bank, where he met managing partner Gunnar Klintberg. In 1986, the pair founded Holberg, Inc. as a merchant bank and opened for business in Greenwich, Connecticut. Orkla ASA, a big Norwegian consumer brands company, supplied one third of the capital for Holberg.

Later in 1986, Holberg bought NEBCO Distribution, an Omaha-based company that distributed candies and snacks to theaters and concession stands, with $60 million in sales and 100 employees. Three years later, in 1989, Holberg bought APCOA, a national company managing parking facilities. Soon afterwards, Holberg, Inc. became Holberg Industries, Inc. The two subsidiaries grew through acquisitions to become AmeriServe Food Distribution, Inc. and APCOA/Standard Parking, which by 1999 were national leaders in their industries. In 2000, however, AmeriServe declared bankruptcy, and by August it had agreed to sell its U.S. distribution system to McLane Co., a unit of Wal-Mart Stores, Inc. AmeriServe’s Canadian and food equipment divisions were sold to other purchasers.

The AmeriServe bankruptcy and sale ended John Holten’s vision of a national distribution system serving fast-food and casual dining restaurant chains. Holberg Industries’ investment in the creation of a nationwide parking management firm appeared more solid, but the future makeup of Holberg was unclear at the end of August 2000.

APCOA/Standard Parking, Inc., First 25 Years: 1949–74

In 1949, future U.S. Senator Howard Metzenbaum and Alva T. “Ted” Bonda founded Airport Parking Company of America (APCOA) in Cleveland, Ohio. For several years the two had done well with Metzenbaum’s car rental business, which be-came one of the largest Avis franchises. Figuring that air travel might be the coming thing, but sticking with what they knew, they leased space from airport authorities, to give travelers a place to park their cars. Thus began APCOA. Then, in 1951, they won a contract to manage paid parking at Cleveland’s airport. The company made parking lots more secure by hiring guards and adding lighting, and quickly built its business by taking over lots from municipalities and developers and running them more efficiently. But they did not buy or own parking lots, thus avoiding the risks of real estate ownership. The company continued to diversify, adding franchises for airport hotels and more Avis rental car operations to its parking leases.

Harold Geneen, head of International Telephone and Tele-graph Corporation (ITT), liked APCOA’s car rental franchises and in 1966 bought the company for $25 million. Edwin Roth, who had worked for Metzenbaum, was named president. As part of ITT, the company added building management services, bus and taxicab operations, and management of parking operations in Europe.

New Owners: 1975–88

In 1975, Roth offered Geneen $10 million for the company’s parking operations and took the company private. In the United States, the company managed parking at 403 locations, with nearly two-thirds of its $110 million in 1976 revenue coming from its 100 airport lots, including Miami, La Guardia and Dallas-Fort Worth. In the next five years, revenues doubled and profits quadrupled.

Six years later, in 1981, Roth sold APCOA’s North American parking operations to Buffalo-based Delaware North Companies, a private holding company, for an estimated $25 million. Roth kept APCOA’s European parking operations. At that time, APCOA owned, leased, or managed some 600 parking properties in 167 cities in 44 states and the District of Columbia. The company had 5,000 employees, parked more than 300 million cars, and had sales of $278 million, making it the largest parking firm in the world and twice the size of its nearest competitor.

APCOA had prospered even as the highly fragmented $2.5 billion U.S. parking industry ran into problems with high mortgage interest rates and land costs. A 1982 Business Week article listed several factors contributing to APCOA’s success: the company’s shift from airports to central city sites to serve the many office complexes being built; concentrating in fast-growing Sunbelt cities; and becoming a leader in raising prices. Perhaps most importantly, according to the article, APCOA helped some developers finance their parking garages (lending credit or cash) in exchange for “lenient long-term leases” on them. APCOA was so big it had the money to lend, and the terms of the leases helped the company maintain higher than average profits on sales in a business known for thin margins.

Roth remained as CEO under Delaware North, and APCOA brought in about $150 million a year, approximately 20 percent of the parent’s annual revenues of some $750 million. In 1987, G. Walter Stuelpe, Jr., was named chief executive of APCOA, having been appointed president and COO the year before.

A Part of Holberg: 1989–97

In 1989, Delaware North sold APCOA to company managers and other investors, who formed AP Holdings Inc. Holberg, Inc. was the majority investor, owning 77 percent. Two years later, in 1991, APCOA and Holberg formed a joint venture with John Hancock Properties, creating an investment fund for acquiring freestanding garages in the downtown business districts of cities where APCOA was managing parking facilities. This would become a pattern for the parent and subsidiary, with APCOA responsible for managing and operating, but not owning, the facilities.

Parking lots were managed one of two ways: a low-risk, fixed-fee management contract that ran for two to three years and required no capital investment, or a lease contract for four to ten years under which the managing company paid to expand or improve the property and received a set percentage (ten percent) of the revenues. Into the early 1990s, APCOA continued to explore lease options.

For example, APCOA had moved into the management of hospital parking facilities, and in 1993, initiated a first-of-its-kind development project with a public hospital. APCOA financed, designed, and built a parking garage at the Westchester County (NY) Medical Center, all at its own expense. It would operate and maintain the garage for 30 years (along with 19 surface lots at the hospital), at which point the county would own the facility debt free. During that period, the county would receive a guaranteed $10 million, half of the projected net profits of $20 million.

APCOA prided itself in implementing technological improvements at the lots it managed. For example, in 1994, it installed an automated credit card reader at the entrance and exit gates at the lot at Cleveland’s airport. Believed to be the first of its kind, the technology quickly became popular with parkers, because it was faster than waiting for a cashier. Other technologies included proprietary software such as ParkStat, to calculate rate alternatives, and Client View, which allowed clients to access financial and operating information about their facilities.

The company also began buying other parking management companies, focusing on companies in the cities where APCOA already operated or on larger, regional companies. In 1997, APCOA made four acquisitions, including one that strengthened its presence in downtown garages in the Northeast. By the end of that year, the company was managing and operating some 700 urban, airport, and hospital parking facilities nationwide.

Standard Parking Merger: 1998

Then, in January 1998, APCOA announced it was buying Standard Parking for 65 million in cash plus assumption of certain liabilities and outstanding shares. In an industry that had been consolidating for several years, the merger resulted in a company that not only increased its size and geographical coverage but also had complementary expertise. APCOA was known for its back-office technology, and Standard Parking, for its innovative customer service.

Standard’s most famous innovation was theme parking ga-rages to help people find their cars. Standard President Myron Warshauer introduced the concept in 1984, saying he was tired of hearing people say they hated garages. The first theme was a “city and song” garage in Chicago where each floor represented a different city, and speakers beside the elevators played music associated with that city, such as Frank Sinatra singing “New York, New York.” Warshauer followed this with a theater-theme garage and one featuring colleges and school fight songs. In Los Angeles, he developed a movie theme (with levels marked “Gone With the Wind,” “The Wizard of Oz,” “Singing in the Rain,” and “Star Wars”).

Company Perspectives

We restructure industries and make strategic acquisitions. We consolidate and integrate companies, and back up our investments with human and capital resources.

Then, in 1994, the company began offering car care services at its garage and lots at O’Hare International Airport. Customers could leave their cars in special spaces and sign up for a muffler replacement, wheel alignment or brake work to be done while they were gone. The work was performed by Midas International and customers did not have to pay anything above regular parking and service costs. The services, called CarCare, were soon offered at other facilities managed by Standard. In 1997, Standard introduced Books-To-Go, followed by Tapes-To-Go, offering monthly customers audiotape and videotape libraries free of charge.

With the merger, Stuelpe became president of the new company, APCOA/Standard Parking, and Myron Warshauer be-came CEO. APCOA was the bigger company, with $475 million in 1997 revenues and more than 700 operations in 30 cities. Standard Parking had $450 million in revenues and managed 380 properties in 29 cities. The company continued to grow by acquisition. Before 1998 ended, the company bought Century Parking and Executive Parking, both of Los Angeles.

APCOA/Standard integrated its companies and other acquisitions under its Ambiance in Parking program and continued to buy other companies, including three more in the first half of 1999. Revenues for 1999 were $248 million, with a $9.5 million loss. The company continued to reduce its proportion of its leases, which it had been doing since 1994, and by mid-2000, operated nearly 80 percent of its facilities under management contracts. In February 2000, Myron Warshauer was named president as well as CEO, while Walter Stuelpe remained as a board member.

AmeriServe Food Distribution, Inc., NEBCO to NEBCO Evans: 1986–90

Holberg’s first acquisition was in 1986, with the purchase of NEBCO Distribution of Omaha, Inc. The 40-year-old, Nebraska company served theaters and concessions, had 100 employees, and rang up annual sales of $60 million. According to Carol Perkins in a 1997 ID article, Holten and Klintberg saw the fragmented foodservice distribution industry as ripe for consolidation and “realized how technology and systems could produce a competitive edge.” They decided to concentrate on customers with limited menus, and began with the purchase of NEBCO.

Customers with limited menus (generally fast-food restaurant chains) were served by companies called systems distributors which tailored their services and product mix to those menu lists. The distributors stocked only the specific items used by their customers, working on a low-margin, cost-plus basis. The niche, which was created in the early 1970s, supported about 120 systems distributors (compared to over 3,000 more general companies). The largest ten of these specialists represented more than seven percent of the $96 billion distributor business in 1989.

At the beginning of 1990, NEBCO, with 1989 sales of $86 million, bought Evans Brothers of Wisconsin, creating NEBCO Evans Distribution. Evans, a privately held company formed in 1934, made its money ($116.5 million in 1989) delivering fountain products and salted nuts to drugstores. The new company served 14 north-central states and had combined sales of $210 million for 1990, up 3.7 percent from combined 1989 figures. Longstanding customers included A&W, Carousel Snack Bars, Kmart, Burger King, Wendy’s, KFC, Church’s, and International Dairy Queen. In December, the regional specialist continued to grow, acquiring L.L. Distribution Systems, a $60 million company out of Minneapolis.

From NEBCO Evans to NEBCO AmeriServ: 1991–96

Holberg invested heavily in new technology for NEBCO Evans. This included on-board truck computers and automated routing and scheduling software as well as an order entry and inventory replenishment system for its 2,500 chain customers. In 1991, NEBCO Evans added Godfather’s units to its customer list and bought Condon Supply Co., another Minnesota systems distributor. Sales for that year jumped to $298 million, aided by the acquisitions. By 1995, that revenue had grown to $400 million and NEBCO Evans had 500 employees, with three distribution centers in the Midwest.

Then, in 1996, Nebco Evans bought AmeriServ, a systems distribution company more than twice its size. AmeriServ was the result of a 1989 consolidation of several regional chain distributors into a single division of John Lewis Associates LP. The regionals that became AmeriServ included two of the country’s biggest systems distributors, Sonneveldt Co. in Michigan and Interstate Distributors, Inc. (IDI) in Atlanta, along with Post Food Service in Denver, First Choice Food Distributors in Fort Worth, and Alpha Distributors in Wisconsin. The year before it was bought by NEBCO Evans, AmeriServ was distributing to customers in 38 states, had sales of $950 million, and employed over 1,200 people.

John Holten became chairman and CEO of the new company, which was called NEBCO-AmeriServ. He began constructing new distribution centers while closing and consoli-dating others. The combined company had 1996 revenues of $1.5 billion.

Key Dates

1986:: John Holberg and Gunnar Klintberg found Holberg, Inc.; Holberg buys NEBCO Distribution.
1989:: Holberg buys controlling interest in parking lot management firm APCOA.
1990:: NEBCO creates NEBCO EVANS with the acquisition of Evans Brothers of Wisconsin.
1996:: NEBCO EVANS buys AmeriServ and creates NEBCO-AmeriServ.
1997:: NEBCO-AmeriServ consolidates as AmeriServe Food Distribution, acquires PepsiCo Food Systems and becomes nation’s largest systems distributor.
1998:: AmeriServe acquires ProSource; APCOA buys Standard Parking Inc. to form APCOA/Standard.
2000:: AmeriServe files for Chapter 11 bankruptcy protection and is sold to McLane, a subsidiary of Wal-Mart.

AmeriServe Keeps Buying: 1997–98

Early in 1997, the distribution company announced a new name, AmeriServe, with an “e” added for excellence according to an article in ID, and the goal of becoming the number one standardized systems distributor.

In July 1997, ArneriServe agreed to acquire PepsiCo Food Systems Worldwide (PFS) for $830 million. PFS, with sales of $3.4 billion, served some 18,000 restaurants in the United States and Canada. Most of these had been owned by PepsiCo, including KFC, Pizza Hut, and Taco Bell, and had just been spun off into Tricon Global Restaurants. AmeriServe, which now served 28,000 restaurants, had a sales potential of $5.4 billion for 1997.

Within a year (May 1998), AmeriServe completed the purchase of ProSource, Inc., the second largest systems distributor in the United States. AmeriServe refinanced all the Florida-based ProSource’s outstanding debt and paid $343 million ($15 cash per share). According to a 2000 Forbes article, ProSource stock had been trading at $7 the day before the purchase was announced. AmeriServe was now the largest systems distributor and the second largest foodservice distributor in the country. It served 38,000 restaurants in the United States, Canada, and Mexico, employed 8,500 people, and had sales in 1998 of $7.4 billion. But that year, which was its best sales year, AmeriServe lost $147 million.

AmeriServe Problems: 1999–2000

John Holten’s attempt to offset the industry’s low margins through volume resulted in “indigestion,” a 2000 Forbes article put it. Going in two years from a $400 million business to one bringing in over $7 billion proved to be too much. The melding of delivery schedules and accounting systems, installation of software, insuring Y2K compliance, and consolidation of distribution centers were not the only problems. AmeriServe was $2 billion in debt. During 1999, deliveries started to slip or were incomplete.

After three quarters, AmeriServe announced losses of $178 million on sales of $6 billion, laid off 1,500 employees, and dropped its casual dining business. In February 2000, AmeriServe filed for bankruptcy protection and Holten resigned as CEO, although he retained the position of chairman. Burger King pulled out in the spring, taking one-third of AmeriServe’s business. In May, the company filed suit against Holten, charging him with wrongfully diverting funds from AmeriServe into other companies. It also charged its largest customer, Tricon Global Restaurants, with refusing to turn over $103 million owed for past sales.

By August 2000, AmeriServe announced it was selling its Canadian division to Prizm Brandz LP for just over $1 million and its entire equipment division to PrimeSource FoodService Equipment, Inc., a company formed by North Texas Opportunity Fund of Dallas. Then it announced it was selling the U.S. distribution division to McLane Company, Inc. McLane, a subsidiary of Wal-Mart Stores with $8.8 billion in revenues, was the largest distributor to convenience stores and the biggest distributor of cigarettes, next to the tobacco companies themselves.