Penmac Inc. creates ESOP

Penmac Staffing Services Inc. has racked up numerous accomplishments since its founding in 1988.

The most recent is establishing an employee stock ownership plan for its 15,000 associates. Owners of the regional staffing and human resources company completed the ESOP paperwork Oct. 28 and announced the sale to staff during an employee meeting that evening.

The deal makes Penmac the sixth-largest ESOP-owned business in the nation, based on a May 2010 survey by the National Center for Employee Ownership. Penmac places ahead of Boise, Idaho-based supermarket company Winco Foods with 13,000 workers and behind Bowling Green, Ken.-based supermarket company Houchens Industries with 16,826.

“It really won’t mean anything different to our customers, our business customers,” said Penmac President Paula Adams. “It gives our associates an added benefit. There won’t be any change in management.”

During establishment of an ESOP, company owners sell their stock back to the business and stock ownership then is transferred to the employees, Adams said. All of Penmac’s associates – temporary, part-time and full-time – will be eligible for enrollment after they have logged a yet-to-be-determined number of hours, she said.

Adams said the ESOP deal was structured with an eye on founder Patti Penny’s retirement. Penny, who is Adams’ mother, formed the company in 1988 with a $15,000 investment.

“It really is an alternative way, I think, for owners like my mom, for instance, who is looking for a way to retire,” Adams said of Penny, who earned Springfield Business Journal’s 2009 Lifetime Achievement in Business Award. “This gave her the opportunity to still be in management. She’s still holding the CEO title, and I’m still president.”

New York-based boutique investment bank CSG Partners LLC, led by managing director George Thacker, designed and implemented the transaction, negotiated between the seller, buyer and a trustee, a role Thacker served.

“The Penny family sold its interest in the business to the ESOP,” Thacker said. “The company remains the same, but we’re changing the shareholders.”

The family’s stock in Penmac, sold to the ESOP for an undisclosed amount, will be allocated to employees during the next several years, Thacker said.

The details of Penmac’s ESOP have not been discussed with associates other than those who work in-house. While officials informally rolled out the plan to Penmac’s 126 in-house employees, Thacker said literature for all employees is still being put together.

“It’s really just in very, very baby stages,” Adams added. “We haven’t figured up a vesting schedule or a time frame.”

An ESOP also can provide benefits for the company, Thacker said, noting that businesses can operate tax-free after a period of time as an ESOP, and owners can sell their businesses tax-free.
ESOP participation is considered an employee benefit, said Leah Ann Iaguessa, chief financial officer.

“Everyone is eligible and participates,” Iaguessa said. “There is no contribution required for anyone who participates, but there is a vesting schedule.”

Vested employees receive annual stock allocations and resulting dividends based on their compensation and company earnings. Thacker said the vesting schedule is typically three years.

“As the company’s performance grows, so does the employee’s retirement account,” Thacker said.
With headquarters at 447 South Ave., Penmac operates 26 branches in five states, including three in Springfield and locations in Marshfield and Lebanon. The firm’s services reach into 10 states.

In 2005, the company topped Springfield Business Journal’s list of Dynamic Dozen companies, recognizing the fastest-growing businesses in the Ozarks. Penmac produced a revenue record of $97.7 million in 2006 and ranked No. 10 among SBJ’s 2007 Dynamic Dozen.

Last month, Penny was named a finalist in the Lifetime Achievement Award category in the seventh-annual Stevie Awards for Women in Business. Winners will be announced Nov. 12 at the Marriott Marquis hotel in New York.[[In-content Ad]]