Making Deals—And Money

The spinoff of Sunny Delight—making it an "orphan" company—is being followed by the beverage industry and Wall Street alike. J.W. Childs has a long history of reaping fat profits by purchasing ignored or underdeveloped business units of large conglomerates, injecting them with new life and reselling them for huge profits.

Since 1995, the Boston-based firm has purchased or bought significant stakes in 28 companies including Meow Mix, Hartz Mountain, Bass Pro Shops, Chevys Mexican Restaurants, Cinnabon, Ghirardelli Chocolates, NutraSweet, General Nutrition Centers and American Safety Razor.

John W. Childs, the namesake behind the company, made his best-known deal in 1994 as a partner in the buyout firm Thomas H. Lee, when Snapple was sold to Quaker Oats for $1.7 billion, resulting in a $900 million gain for Lee after only 2 1/2 years of ownership. Childs formed his own buyout firm a year later.

Childs sees in Sunny Delight another opportunity to revitalize a well-known but languishing brand.

The juice drink was created in 1964 and purchased by Cincinnati-based P&G in 1989. In the 1990s, with P&G's marketing machine in full swing, it became one of the world's fastest-growing beverage products. But a series of events in the late 1990s led to a sharp drop in sales. A 5-year-old girl in Britain developed an orange tinge to her skin after drinking massive quantities of Sunny D (it turned out to be a reaction to beta carotene, found in most juice drinks); this incident, combined with parents' concerns over the nutritional value of juice drinks, put a damper on the product's appeal. P&G was able to stabilize the business at about $600 million in annual sales, but management no longer viewed it as a core business.