Winnetka private equity firm wins bankruptcy auction for Oberweis Dairy

There’s a new milkman in Chicago.

Geoff Hoffmann, co-CEO of his family’s eponymous Winnetka-based private equity firm, emerged as the top bidder Wednesday for the bankrupt assets of the century-old Oberweis Dairy, putting everything from its North Aurora plant to 40 branded ice cream stores under new ownership.

The undisclosed offer from the Hoffmann Family of Companies through its investment arm, Osprey Capital, bested Brian Boomsma, owner of Chicago-based Dutch Farms, who made a $20 million stalking horse bid in April for Oberweis.

“We think that the brand is as good as it gets in the ice cream and dairy space,” Hoffmann said Wednesday. “We’re excited and ready to make investments in the company to make it as big and as strong as it’s ever been.”

The deal, pending final court approval, will add the Oberweis dairy business to the diverse Hoffmann investment portfolio, which includes everything from wineries and charter cruise ships to the Florida Everblades, a minor league hockey team.

Hoffmann’s real estate arm has over $1 billion in retail, commercial, industrial and residential properties including more than two dozen North Shore buildings and the 85th floor penthouse at Trump Tower in Chicago.

Founded by patriarch David Hoffmann in 2002, the family investment firm owns more than 100 brands in 30 countries. Oberweis would be its first foray into the dairy business, but the Hoffmann family has a milk pedigree nonetheless.

“My grandfather was a home milk delivery man in small town Missouri and my dad would actually ride his truck route with him at three in the morning every day,” Hoffmann said in an interview last week. “And so we’ve been around the industry for a long time.”

Oberweis, known for its old-school bottled milk and ice cream, has been in the dairy industry for a long time. But recent years have been challenging for the family-owned business, which filed for Chapter 11 bankruptcy protection in April amid declining revenues, mounting debt and some costly strategic mistakes.

Started in 1915 by Peter Oberweis, an Aurora dairy farmer who peddled milk from a single horse-drawn wagon, the company has grown into a multistate enterprise with ice cream stores in Chicago, Indiana, Michigan and St. Louis, widespread grocery distribution and home delivery service.

It outsources some manufacturing but has a 27-year-old dairy plant at its North Aurora headquarters.

The Oberweis name became synonymous with more than milk in the new millennium when Jim Oberweis, chairman of the dairy and grandson of its founder, launched a string of high-profile but mostly failed bids for Illinois political office as a Republican candidate.

In 2007, Joe Oberweis took the reins as the fourth-generation leader of the family business, but it has been a rocky road of late.

While its home delivery service flourished during pandemic lockdowns, Oberweis has been struggling since, with annual revenue declining from an all-time high of  $116 million in 2020 to $95 million last year, according to its bankruptcy filing.

In addition to broader headwinds faced by the dairy industry, which is losing ground to alternatives such as almond milk, Oberweis made a number of missteps including an ill-fated attempt to enter Asian markets, outsourcing organic milk and sweet drink products to a Texas manufacturer and transitioning to amber-colored bottles in grocery stores, which customers found unappealing.

Joe Oberweis resigned in May 2023,  and after millions of dollars in cost cuts failed to stem operating losses, the family decidedto sell the business in October. When no buyers stepped up, Oberweis Dairy filed for bankruptcy protection April 12.  The company also notified the state it might lay off 127 workers at the North Aurora dairy June 11 — unless a buyer was found.

On April 23, the company announced Brian Boomsma, owner of Chicago-based Dutch Farms, made a $20 million stalking horse bid for nearly all of the operating assets of the bankrupt Oberweis.

Dutch Farms, which is headquartered in the Pullman neighborhood on Chicago’s South Side, is a family-owned business whose branded offerings include cheese, eggs, milk, butter and other dairy products.

That same day, Hoffmann announced its intention to make a competitive bid for Oberweis, following through one month later on Friday, a court-imposed deadline. The two bidders participated in an auction Wednesday morning in a Chicago law office, with Hoffman emerging victorious, pending court approval.

Boomsma, a creditor in the bankruptcy whose company sells eggs and other products through Oberweis and delivers most of their milk to grocery stores, was hoping to improve efficiency and make the dairy offerings more affordable under his ownership.

Instead, Boomsma offered congratulations — and his continued services — to the winning bidders, who were likewise welcomed by Oberweis management.

“We look forward to exciting developments ahead with Hoffmann Family of Companies,” Adam Kraber, president of Oberweis Dairy, said in a news release.

For Geoff Hoffmann, the investment thesis is centered around the premise that cream always rises to the top, and that premium Oberweis dairy products will do likewise.

His due diligence process included driving to Oberweis stores with four sons in tow to sample a variety of dairy treats.

“I’ve never eaten so much ice cream in my life,” Hoffmann said last week, just before making the bid to buy Oberweis. “World’s best ice cream, unbelievable chocolate milk, great milk.”

Plans for Oberweis include building on the brand’s heritage, keeping the North Aurora plant running and if all goes right, making it a lot busier, Hoffman said. The new owners plan to focus investment on the plant to enhance production capabilities and streamline operations, he said.

He also plans to keep the current management team together, which Hoffman said has done most of the necessary “heavy lifting” to cut costs, stanch the red ink and position the company for growth.

“From our perspective, it’s going to be all about growth,” Hoffman said. “Most of the tough decisions have been made.”

A sale hearing is scheduled for June 5 in a Chicago bankruptcy court, with the acquisition expected to close within 10 days of court approval, Hoffman said.

rchannick@chicagotribune.com