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Tasty Baking Company (TSTY) to Sell Hunting Park Bakery to TKMG Associates for $6M

April 6, 2010 7:31 AM EDT
Tasty Baking Company (Nasdaq: TSTY) announced today that it has entered into a Purchase and Sale Agreement with TKMG Associates, L.P. and its guarantor, Metro Development Company, for the sale of Tasty Baking Company’s Philadelphia bakery property located at 2801 Hunting Park Avenue and its former corporate offices and distribution center located at 3413 Fox Street for $6.0 million. These are the properties that the Company is vacating in connection with its move to the Philadelphia Navy Yard.

TKMG Associates, L.P. is a single purpose entity formed by Metro Development Company which is a private, Philadelphia company that specializes in the development of large-scale real estate projects with leading national retailers. Metro Development Company has developed over five million square feet of retail space and currently its affiliates own and manage approximately one million square feet of retail space with over two hundred tenant leases under its management.

The closing of the transaction contemplated by the Purchase and Sale Agreement is subject to completion of due diligence by the buyer and the Company receiving a zoning change for the properties from the City of Philadelphia. The Purchase and Sale Agreement provides for the transaction to be closed within 60 days after the expiration of a 90 day due diligence period provided an agreed upon zoning change has been made. In the event the zoning has not been changed as required within a period ending 60 days after the due diligence period, the Company can extend the period to obtain the zoning for up to 6 months. The buyer may terminate the Agreement in its sole discretion at any time during the due diligence period.

Charles P. Pizzi, president and chief executive officer of Tasty Baking Company, said, “This transaction is an important step in the completion of our manufacturing strategy. Upon consummation of the transaction, the cash proceeds from the sale will allow Tasty Baking to reduce the debt associated with the investment in our new manufacturing facility at the Philadelphia Navy Yard.”

Mr. Pizzi continued, “We are also pleased to note that TKMG Associates L.P. anticipates developing the site into a retail center to serve the surrounding area. We believe this will create jobs and improve the overall quality of life in the community. Further, in addition to the support that Tasty Baking will continue to provide to the Allegheny West Foundation, TKMG Associates, L.P. has committed to providing funds to that organization and its efforts to support local residents and improve the community. This transaction will be a win-win for everyone involved and we are very pleased about that.”

Mr. Pizzi concluded, “Completing the transition into our new bakery at the Philadelphia Navy Yard will truly be a significant and transformative event for Tasty Baking as the new bakery is expected to increase production flexibility and provide the Company with $13-15 million per year in pre-tax cash savings net of leases, but before debt service. As a company, we are intently focused on completing this project while at the same time carefully managing the day to day needs of our business.”

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