Sun Country Moves Forward Under New Ownership
After emerging from bankruptcy and actively seeking a buyer, Mendota Heights-based Sun Country Airlines has been sold.
Sun Country on Wednesday announced that it has been sold to a private company owned by the family of Mark Davis, which owns Le Sueur-based Cambria Holdings, LLC, a manufacturer and retailer of quartz countertops. The Davises, who are from St. Peter, also own Eden Prairie-based Davisco Foods International, Inc.
The company said that no changes to its operations, management team, headquarters, or frequent-flyer program are planned.
Financial terms of the deal were not disclosed, but bankruptcy trustee Doug Kelley said that the sale price was “substantially above” a $24 million floor price he set for the airline, according to a report by the Star Tribune.
Kelley is the trustee in charge of the Petters estate, which is still in bankruptcy court. Attorney Daryle Uphoff of Lindquist & Vennum, who represents Kelley in the case, told Twin Cities Business on Thursday that the parties involved in the sale sought to keep the price confidential. “The trustee had filed a motion before the bankruptcy court, and the court approved the sale at a price that was at least as great as the price that was approved in the motion,” he said. “No further approval is required, and that's why the price remains confidential.”
The Petters bankruptcy estate and certain other “receivership entities connected to the former Petters empire” will receive about 56.6 percent of the sale price, while Whitebox Advisors, which bought Sun Country along with Petters, will net roughly 43 percent, Uphoff said. Sun Country CEO Stan Gadek received a fraction of a percent in the deal. That breakdown was dictated by the entities' respective claims in the bankruptcy case, Uphoff said.
Neither Kelley nor Martin Davis, president and CEO of Cambria, were available for comment before this story was published.
Sun Country CEO Stan Gadek told Twin Cities Business on Wednesday that the Davises are the “perfect owners-the best alignment I could hope to achieve,” adding that they will work to identify “synergies for cross-marketing” opportunities with the Cambria brand.
Sun Country-which officially emerged from bankruptcy in February-has been looking for a buyer for well over a year. In a reorganization plan filed in April 2010, the company said that it believes that “the indications of interest confirm a valuation in the range of $10 million to $30 million.”
Kelley, the trustee handling the airline's bankruptcy estate, revealed in court documents earlier this year that he was “anticipating accepting a letter of intent from a proposed purchaser shortly.” Sun Country appeared close to a sale, but the buyer remained unnamed. Kelley had asked U.S. Bankruptcy Judge Gregory Kishel to seal the name of the expected buyer and offer price, along with the minimum amount the airline would accept-a request that was granted.
Sun Country filed for Chapter 11 protection in October 2008 just three days after Tom Petters-then the airline's majority stockholder-was arrested on charges related to investment fraud. The filing allowed Sun Country to separate itself from the other Petters companies that were being taken over by a court appointee. Petters is now serving a 50-year sentence for running a Ponzi scheme that defrauded investors of an estimated $3.65 billion.
Petters Aviation, LLC, a unit of Minnetonka-based Petters Group Worldwide, along with Minneapolis-based Whitebox Advisors, acquired Sun Country in 2006, with each entity owning a 50 percent stake. In 2007, Petters Aviation bought out Whitebox's share of the company. Whitebox became a creditor of Sun Country, which is why it received a portion of the proceeds of the sale to the Davises.
Sun Country now employs more than 800 people and operates flights to 38 destinations in the United States, Mexico, Europe, and the Caribbean. It reported profits of $13 million last year after combined losses of nearly $60 million in 2007 and 2008, followed by a $1.4 million profit in 2009, according to the Star Tribune.
Gadek said that the industry continues to be challenged by high fuel prices. “Our philosophy is profitability first, growth second,” he said, adding that the company will look for areas to grow, but it won't expand at the expense of missing profit targets. “Last year was a profitable year, and this will be a profitable year.”
He pointed out that following the company's reorganization and its successful exit from bankruptcy, Sun Country is “essentially debt free.” “We went from the brink of potentially going away to reorganizing, becoming profitable, saving 800 jobs, and now getting great ownership.”