Blue Bell Creameries Inc., makers of the iconic Texas Blue Bell ice cream, has agreed to a $60 million settlement with investors who had claimed their interest was dramatically devalued by a 2015 outbreak of Listeria in company plants that could have — and should have — been avoided.
The suit, filed in Delaware, involves investors in Blue Bell Creameries, LP, a limited partnership that served as an investment vehicle for the company. The settlement includes cancellation of a $45.2 million loan made to the limited partnership by Blue Bell Creameries Inc., as well as a $15 million cash payout over two years to investors not involved in running the company.
The 2015 outbreak of listeriosis, which resulted in three deaths and a national recall of Blue Bell’s ice cream products, precipitated a major financial crisis for the privately traded company and resulted in a reconfiguration of the company board. The company’s value and reputation plummeted when health investigators found the deadly bacterium Listeria monocytogenes at plants in Texas, Oklahoma and Alabama and a long list of food safety violations that had long been ignored.
The company has since recovered, but in response to their cash crisis, Blue Bell officers and directors struck a deal with Moo Partners, a fund controlled by Fort Worth investor Sid Bass that had an affiliation with one of Blue Bell’s directors. Moo Partners provided Blue Bell with a $125 million credit facility and purchased a $100 million warrant for an estimated 42% of Blue Bell, or $50,000 per share. Moo demanded an expansion of the board of directors that, in effect, gave Moo control of one-third of its votes, a change that investors claimed devalued their shares of the partnership.
The parties, who include Mary Giddings Wenske and a trust she represents, were represented by David Wynne and Scott Burdine of Houston-based Burdine Wynne, as well as the Delaware firm of Rosenthal, Monhait & Goddess.
Though the settlement benefits all of the limited partners, the cash payment accrues to specific partners representing a 21.25% in the Blue Bell partnership. At least one major lawsuit remains, that of Jack Marchand II of Corpus Christi, a shareholder in Blue Bell Creameries USA, whose complaint, dismissed by two lower courts in Delaware was revived last June by the Delaware Supreme Court.