Winona-based Watkins could have a mystery buyer

Updated: 4:19 p.m. | Posted: 2:13 p.m.

Watkins Inc., the nationally known maker of J.R. Watkins lotions, toiletries and cooking spices, could sell at least parts of the company, according to court filings stemming from the chief executive's divorce proceedings.

Headquartered in Winona, the privately held firm is one of Minnesota's oldest companies, dating back to 1868 when founder J.R. Watkins began selling a liniment oil still available today.

Nearly 40 years ago, financier Irwin Jacobs rescued Watkins from bankruptcy and his son, Mark, has been in charge of the company for about half that time.

The Jacobs operation is only the third to own and operate what has been a family run business since the outset.

But the company, which employs hundreds in a Winona factory and others in offices in Hopkins and Wayzata, has quietly been exploring a sale since April 2016. That's when it retained a national business brokerage firm to find a purchaser, according to court papers filed Monday that are the first public indication of a willingness to sell.

A buyer looking to acquire the personal and home care lines of Watkins came forward last month with a letter of interest, the documents show.

Mark Jacobs said Tuesday in a written statement to MPR News that there is no final deal in place currently.

"We do however, have a responsibility to listen to all offers that could add value to our company and to its Stakeholders," Jacobs said. "If and when we decide to take on a partner to help continue the growth of the company, it will be an investor/partner who shares our commitment to the brand's integrity, our employees, our customers, our direct selling consultants and our retail partners. Additionally, we are committed to keeping our ownership and being a part of the tremendous growth ahead."

The rest is a mystery because the potential buyer insisted on a hush-hush arrangement that shields its identity, a possible purchase price and its plans for the portions of the business it would gobble up. The transaction is currently in the due diligence phase.

"They've been looking at stuff. We have no further action from them, no additional progress," said Barry Gersick, a Minneapolis-based attorney for Watkins. "Nothing is binding ... Right now, all they're doing is looking and seeing if they want to go further."

Court cases in Hennepin County and in southern California brought the possible deal to light.

Mark Jacobs, who lives in California and has been CEO of Watkins since 1998, is going through a divorce. As part of that, Jacobs provided a redacted copy of the letter of interest to his wife, Patricia. Court papers say she sought the information as she seeks to appraise his finances for the purposes of dividing their property.

Lawyers for Patricia Jacobs planned to ask a California judge on Tuesday to require release to her a nonredacted copy. Watkins, along with Irwin Jacobs, sued Mark Jacobs in Minnesota on Monday, asking for an injunction to stop further release of information; a hearing is set for Thursday in Hennepin County District Court.

"This is an extremely important potential business transaction for Watkins and its ownership interest," Gersick and law partner Martin Fallon wrote in pleadings that seek an emergency court order. "Watkins would be irreparably harmed if the potential deal is negatively impacted and falls through because of the disclosure of information subject to the (nondisclosure agreement)."

The lawyers went on: "To lose the opportunity presented by the current interested entity, and without any other interested buyers in the background, would precipitate financial damage and harm to Watkins and its ownership interests that are impossible to quantify or calculate."

In their filing, the Watkins attorneys contend Mark Jacobs violated his fiduciary duties by providing even the redacted copy.

Built as a company offering door-to-door sales of its lotions, tonics and gourmet spices, Watkins has branched out over the years to include cleaning supplies and sell its wares in stores.

In recent years, Mark Jacobs was credited with helping Watkins grow the extract and spice end of its business. The company moved to get its products onto store shelves of more big retailers, such as Wal-Mart, to challenge the big supplier in the market, McCormick and Co.