Fourth-generation entrepreneur back at the market.

Chuck James returns to food business as owner, CEO

Texas can now claim one of the nation's top black entrepreneurs, Charles H. James III, as one of its own. In March, the 41-year-old businessman bought a controlling interest in Dallas-based PrimeSource Food Service Equipment Inc. This distributor of fast-food and casual dining restaurant equipment may now be Texas' largest black-owned company.

To corral control of this privately owned company, James reportedly financed the "low-seven-figure transaction" with cash. Purchasing a stake from the North Texas Opportunity Fund (NTOF), a Dallas-based venture capital group, James bought more than 50% of PrimeSource's common stock, rounding up control of PrimeSource's board. He roped in a long-term employment agreement as CEO, and his election as board chairman was a shoo-in. The other common shares are owned by PrimeSource's other senior managers. The North Texas Opportunity Fund converted its remaining shares into nonvoting preferred stock which means it doesn't hold a board position.

A fourth-generation food-industry entrepreneur, James has built a reputation for adding value to the companies he acquires. Most recently, he created and headed ProduceOnline.com, an Internet business he sold last year for six times the $3.3 million he raised in first-round financing (see "Harvesting an E-Commerce Solution," May 2000, and "Sold for $20 Million," Newspoints, DeceMber 2000). Prior to that, C.H. James & Son Holdings Company Inc. bought and sold its subsidiary, California-based North American Produce, an international produce distributor whose primary customer was McDonald's (see "Oldest B.E. 100's Firm Sells L.A. Subsidiary," Newspoints, March 1999). Way back in 1988, James became CEO of C.H. James & Son, the nation's oldest black-owned family enterprise, founded by James' great grandfather in 1883.

The latest acquisition will have a minimal impact on C.H. James & Son, which last appeared on the BE INDUSTRIAL/SERVICE 100 in 1999 ranked at No. 78 with gross sales of $31.4 million. C.H. James & Son has evolved into a holding company for corporate interests and assets.

After selling his technology-laden Internet start-up last summer, James thought over what he really wanted to do. "It was being involved in the food industry and working with the large quick-service restaurant chains and family dining chains, which is where I spent the vast majority of my career," says James. "My search became more customer-centric than product-centric in terms of the next company I wanted to buy. I was looking for a company that could supply these types of organizations on a regional, national, and, ideally, international basis. PrimeSource is primarily focused on the same channel of distribution that I have been operating in for the last 15 years."

With $175 million in sales and 180 employees, PrimeSource is the fourth-largest restaurant equipment distributor in the United States. The company serves more than 27,000 restaurants around the world, with Taco Bell, KFC, and Pizza Hut as its primary customers.

"Chuck's proven leadership skills and executive talents in the food-service industry will propel PrimeSource to greater heights," says Arthur Hollingsworth, one of three NTOF general partners.

PrimeSource ships some of the ovens, refrigerators, and other restaurant gear from its Indianapolis warehouse or, arranging logistics, drop-ships equipment directly from manufacturers.

Tracing its bloodline back to 1986 through many permutations of huge, publicly traded corporations, PrimeSource was a division of PepsiCo before $9 billion AmeriServe Food Distribution Inc. acquired it in 1997. AmeriServe later filed for Chapter 11 bankruptcy protection. In August 2000, the U.S. Bankruptcy Court approved the NTOF's $26 million bid to purchase AmeriServe's profitable equipment division, valued at $52 million. The unit was then renamed "PrimeSource."

CEO Time Line: C.H. James, III

             1988                        1998

COMPANY      C.H. James & Son            North American Produce

BUSINESS     International produce       International produce
             distributor; nation's       distributor
             oldest black business

FINANCIALS   No. 78 on the 1999 BE       $25 million 1998 revenues
             I/S 100; $31.4 million
             in gross sales

WHAT CHUCK   "As a child growing up in   "Selling North
HAD TO SAY   West Virginia, I knew I     American ... [in 1999]
             would someday work with     ... placed me in a great
             my father."                 position to take more
                                         calculated risks going
                                         forward."

             1999                        2001

COMPANY      ProduceOnline.com           PrimeSource Food Service
                                         Equipment Inc.

BUSINESS     Internet start-up           Restaurant equipment
             produce distributor         distributor

FINANCIALS   Strated with $3.3           $175 million annual sales
             million, sold for $20
             million in 2000

WHAT CHUCK   "We created significant     "PrimeSource is ...
HAD TO SAY   value in a short period     Focused on the same
             of time."                   channel of distribution
                                         that I have been
                                         operating in for the last
                                         15 years."