SPARTAN EMPLOYEE BUYOUT REAL `DAVID & GOLIATH' STORY

SPARTA, Ill. -- After a decade of corporate buyouts, mergers, wage cuts, employee layoffs and threats of plant closure, a new model of doing business has emerged at Spartan Printing Company in downtown Sparta.

"The Spartan employee buyout in late 1992 is a real-life David-and-Goliath story," says Illinois Treasurer Patrick Quinn, who helped engineer the successful buyout of the company, saving more than 1,100 Southern Illinois jobs.

That was last October.

Today, says Marg Halperin, a member of Quinn's staff in the Chicago office, things are still looking up for the company, which features a dozen presses running 24 hours a day in a plant that includes more than 13 acres under roof.

"We employ from 900 to 1,100 people at any one time," said Bob Craig, who has been affiliated with the plant since 1959, and is in the customer relations department. "We're currently running three shifts a day."

"Some weeks are busier than others," said Craig. "We publish a number of periodicals here, including magazines and comic books. Some go out weekly, others bi-monthly and others monthly.

A report from the company's recent newsletter indicates that all is going well for the new owners.

"We're paying our bills, we're making our mortgage payments, and we're keeping busy," noted a statement in a recent company newsletter.

The rescue of the 1,100 jobs at Spartan is a "model for economic development in the 1990s," said Halperin. "It was an opportunity for hard-working men and women to turn back the corporate raiders who were all too successful in the 1980s."

Halperin added that the public-private partnership at Spartan demonstrates how the power of the government can be used to aid development without resorting to expensive "smokestack chasing" and without putting any tax dollars at risk.

Under terms of the $25-$30 million buyout, the company is owned by the plant's employees and some outside equity investors. The employees own 60 percent of the plant through an employee stock-ownership plan. World Color Press retains a $10 million investment in preferred stock of non-voting shares.

Employee buyouts are being used across the country as a tool to rescue good-paying jobs threatened by plant closings. Often, says Halperin, on-site management controlled by employees who are the experts in their field, can revive a business that has been ravaged by distant corporate leadership.

Illinois could move to the forefront of this field with a plan to help develop employee buyout plans for Illinois workers.

The plan was approved by the Illinois House recently by a 66-17 vote. Quinn is spearheading the effort to pass the bill (HB 1746), which calls for the formation of a task force to make recommendations to the legislature by March of 1994.

Terry Deering (D-Nashville) is chief sponsor of the bill, which would create the Illinois Ownership Succession and Employee Ownership Task Force. The task force would determine ways to encourage and aid those interested in creating ownership succession programs or employee stock-ownership plans (ESOPs).

There are hundreds of communities throughout Illinois that depend on one or two companies for economic survival, noted Deering. "The state has a vital interest in keeping these businesses alive and, in many cases, the only way for a community to retain the company is to empower its employees through the formation of an ESOP."

This issue is reflected in the number of small business owners nearing retirement, and the high number of plant closings, said Deering.

"An employee buyout is the kind of creative solution Illinois needs to solve the economic problems in the 1990s," said Quinn. "We have to replace government's traditional linear approach to the economy with a broad spectrum of ideas and tools that will put Illinois men and women to work and keep them at work."

Quinn knows about employee buyouts.

He played a key role in development of the employee buyout plan that serves as a model for Illinois the employee buyout of the Spartan Printing plant.

Quinn and Deering engineered the buyout from Kohlberg, Kravis, Roberts & Company's World Color Press.

In July of 1991, World Color Press threatened to close Spartan Printing, which would have put its 1,100 people on the jobless list.

At that time, Quinn helped employees assemble a team of experts to develop an ESOP. That team included the Midwest Center For Labor Research, brought in to provide technical assistance for the complex financing deal.

Quinn helped arrange financing, identifying banks willing to take on a project of the size needed. LaSalle National Bank of Chicago agreed to a $6 million loan and an $11 million line of credit that company officials could draw from. Quinn agreed to deposit $15 million in state funds in the bank. The funds, which are earning interest for taxpayers, are not at any risk.

The need for a task force became apparent as Spartan Printing employees experienced many difficulties in completing the buyout, including getting insurance to cover workmen's compensation claims.

Quinn's intervention helped seal the deal, coupling the low-interest financing package with his standing as a member of the state prison board. Quinn pointed out to Kohlberg, Kravis, Roberts (KKR) officials that the prison board holds a major investment (about $130 million) in the KKR company. Quinn won a unanimous vote of the pension board urging KKR to do everything in its power to complete the employee buyout of Spartan Printing.

Spartan was then able to negotiate a sale price of approximately $29 million, down from an original price of $42-$45 million. KKR's World Color Press also agreed to contribute a total of $10 million in preferred stock to help finance the deal.

A key component of the package was an employee decision to accept wage cuts. Quinn acknowledged how difficult that has been for the workers. He stressed that this sacrifice was an important element in the total buyout package and helped them buy long-term job security.

"We can do more than retain businesses and jobs in Illinois," said Quinn. "The formation of ownership-succession plans and ESOPs are an effective way to keep a company from going out of business."