Rocky Mountain Chocolate Factory sold about 13% of the company’s shares to American Heritage Railways on Tuesday.
The move is the latest in a whirlwind of decisions the Durango-based confectionery company has made this summer to firmly plant its roots in the community and build capital for its strategic plan.
The total agreed upon purchase is around $2.2 million for 1.25 million shares at a common stock price of $1.75 per share.
AHR purchased 1 million of the shares while sitting RMCF board members purchased 250,000 of the shares.
Rocky Mountain’s stock price has dropped about 80% over the last five years, going from a five-year high of about $9.50 per share in September 2019 to just $1.75 as of Tuesday.
“This offering reflects an initial step for us to strengthen our balance sheet and provides the working capital needed to further advance our updated three-year strategic plan,” said Interim CEO Jeff Geygan. “We are in the final stages of completing a separate non-equity financing that we believe will provide us with the necessary capital required to execute our plans and return RMCF to a state of sustainable growth and profitability.”
During RMCF’s first fiscal quarter ending May 31, the company lost $1.6 million from continuing operations, mostly because of personnel turnover.
The company continues on its path to build a local foundation that Geygan says was lost when executives weren’t working in the community. The locally driven initiative was one that influenced the company to hire former Ballantine Communications Inc. CEO Carrie Cass in July. (BCI also owns The Durango Herald.)
But now it is taking on local investors. From both parties’ perspective, the investment made sense. American Heritage and RMCF benefit from Durango’s tourism market and a RMCF retail store is located within a quarter-mile of the train station. Geygan said the emphasis on local initiatives will only continue the build the Rocky Mountain brand.
And with 2 million American Heritage customers, there are plenty of cross-branding and collaboration opportunities for which to take advantage.
Neither party has revealed how the two companies will collaborate in the future.
“AHR is one of the most renowned organizations in Durango and touches more than 2 million customers per year through directly owned railroads, historic attractions, and the licensing of special events at over 50 additional properties,” Geygan said.
Those licensing rights include The Polar Express and Peanuts by Schulz, among others.
“Their customer base is a natural fit for our premium chocolate and confectionery products,” Geygan added.
Railroad CEO Al Harper said American Heritage has always been about family first and profit second. While investing in Rocky Mountain was a smart business decision, it was another way for American Heritage to embrace the Durango community, he said.
“We've always admired Rocky Mountain Chocolate because it’s a hometown company,” he said. “It's probably the only real public company that's based here.”
Shares were sold in a private placement – a sale of stock shares or bonds to preselected investors rather than publicly on the open market.
“Rocky Mountain Chocolate Factory has such a rich history, and truly its foundation is built right here in Durango,” said American Heritage General Manager John Harper. “We want to see this company develop and prosper.”
tbrown@durangoherald.com
