Parks Sausage is sold: Michu Corp. reportedly pays $10 million for historic company.

Following years of financial setbacks, Parks Sausage Co., one of the nation's oldest black-owned companies, was sold recently to a New York investment firm for an estimated $10 million.

Parks had retained a Baltimore firm, Equity Partners Inc., to shop around for potential investors. In August, a letter of intent was signed by Michu Corp. Michu is an investment firm controlled by W. Kevin Wright, former general counsel to the late Reginald F. Lewis and TLC Beatrice International. The letter was also signed by Anthony S. Fugett (Mr. Lewis' brother), president, chairman and chief executive of ASF Systems Inc., a Baltimore-based computer equipment company.

Although Parks, No. 85 on the BE INDUSTRIAL/SERVICE 100 list, had not been performing well for the last five years, it was not difficult to attract an investor, according to Equity's John Herman Jr., who handled the search.

In 1990, Parks opened a new and much bigger plant in Baltimore's low-income Park Circle neighborhood, after the Orioles took over the former site to build a new baseball stadium. Only later did Raymond and Reginald Haysbert, the father and son team who own the company, realize that bigger is not always better.

What went wrong? Shortly after the move, the company lost two of its biggest customers, Domino's Pizza and Pizza Hut, which both turned to lower-cost sausage makers. "Like any business, they were looking to lower their costs on a continuous basis to the point where it was unprofitable for us to keep the business," says Reginald Haysbert. The irony is that the extra work load required to supply these customers at the old plant was a major justification to double the space at Parks' new site.

More than $8 million in debt--versus $1.5 million before the move--the company was forced to cut back on its advertising to cover its new overhead.

According to Kurt Funderburg, an analyst who watches the meat industry for the Baltimore-based Ferris, Baker, Watts Inc., the industry has been undergoing a lot of consolidation in the last decade, making it harder for small companies like Parks to remain independent and viable. Prior to technological advances that now make it easier for companies to preserve and store meat, each region of the country was formerly serviced by three or four local manufacturers.

Today, fresh products can be transported across the country, eliminating the niche that small companies like Parks once filled. "In addition, food retailers are using fewer suppliers because it's more efficient for them to have only two or three brands on the shelf instead of six or seven. National brands like Jimmy Dean, Bob Evans [and others] tend to get that shelf space," Funderburg says.

Meanwhile, the city of Baltimore, one of the mortgage holders of the new plant, extended Parks a line of credit to provide the company with the working capital to solve its immediate problems.

"The city only gets involved in these mortgage holder relationships when there's a socioeconomic good to come out of the deal," says Baltimore's Housing and Community Development Commissioner Dan Henson. "The plant sits in a pretty distressed community and their being there is a highlight of that community. We don't want to see them leave or the jobs lost or a big vacant building sitting there."

According to Fugett and Wright, they are committed to keeping Parks Sausage headquartered in Baltimore. "Parks is a great product with a tremendous history. The distribution network, marketing appeal and great name recognition will allow for growth. We feel confident that our experience in the food industry and our ideas for product expansion and distribution will expand the company's capacity in the retail, wholesale and institutional categories, explains Fugett.

As Haysbert now prepares for retirement, he summed the situation up as a case of expand or die. The deal with Fugett and Wright ensures that the company will remain in Baltimore and in the hands of African American entrepreneurs. And so mothers from Boston to Baltimore will continue to hear that time-honored request for "More Parks sausages, Mom...please."