The years have been good to Randall Stuewe. Very good. The last time I saw him, 11 years ago, Stuewe seemed a personable, if bland, 41-year-old Midwesterner who had begun the Herculean task of turning around Darling International Inc. Darling was an Irving-based rendering and cooking oil-recycling company that had been looted by previous investors. (The publicly traded company renamed itself Darling Ingredients Inc. last spring, the latest of several name changes since its founding in Chicago 132 years ago.)
Back in 2003, Stuewe [pronounced Stew-ee] found an enterprise in shambles. More than a decade earlier, the company then known as Darling-Delaware had made headlines for becoming the piggy bank for a veritable who’s who of North Texas investors. Think names like Sid and Lee Bass, Edward “Rusty” Rose III, and Richard Rainwater. These and other stockholders had snapped up the grease-collecting company for $96 million, slathered it in debt, and then extracted $180 million in dividends. To settle litigation with incensed bondholders, the investors gave back more than $9 million and abandoned their equity stakes. On the brink of bankruptcy on the eve of Stuewe’s arrival, Darling transformed its creditors into shareholders and tapped the Kansas-reared executive to be its new CEO.
“I learned that if I found something I liked,” Stuewe says, “I could be very good at it.”
The Randall Stuewe I became reacquainted with earlier this year was a bit slimmer, though still no Calvin Klein underwear model. His hair had been allowed to grow out in the back—not wildly, but to a distinctive length not usually seen in boardroom settings. It was individualistic, if not singular; no assembly-line IBM executive image here.
Most important, this was a Randall Stuewe who exuded the confidence of a dragon slayer. With good reason. After all, he’d been through many battles at Darling, executing corporate coup after corporate coup, taking over midsized competitors, swallowing up a bigger rival, then pulling off more major acquisitions in Canada and Europe and completing a huge biofuel deal in Louisiana.
In a decade, Stuewe has taken Darling from a company with yearly net income of $18.2 million to one logging $109 million annually, on 2013 sales of $1.7 billion. He has done it by dealing in materials that others don’t want: meat, fat, and bone remnants from slaughterhouses; used cooking oil from restaurants; and bakery waste from bread and cookie producers. Darling, which has 10,000 employees at 200 locations on five continents, is described today as the country’s “leading provider of rendering, recycling, and recovery solutions to the nation’s food industry.” It makes a range of products worldwide, from animal feed, pet food, and fertilizer to oleo-chemicals, soaps, leather goods, gelatin, and sausage casings. It transforms bakery waste, pig’s blood, and chicken feathers into livestock feed. It processes animal fats and kitchen grease into green diesel fuel in the U.S., Canada and Europe. It produces enough biogas—methane—from organic sludge and food waste to supply 10,000 Dutch homes, and it plans to start using manure for both gas and biophosphate fertilizer.
Last November, an aggressive cat-and-mouse effort by Darling to catch thieves running off with 20 percent of its grease was the subject of an article in New Yorker magazine. Titled “Hot Grease,” the story described Stuewe as a Kansas “farm kid” with a “booming voice” and a “wide girth,” clearly rubbing him the wrong way. Rattling off inaccuracies, he says he did not grow up on a farm in the Sunflower State, as the article stated, but actually was reared in Salina, Kansas, where both his parents worked at Beechcraft—his father in engineering, his mother as a nurse and then in human resources. Although far from svelte, Stuewe clearly doesn’t think his girth is all that wide, either. As I said, he looks good these days, if not exactly trim—considering he’s made preparing Italian food a hobby and one of his few pastimes.
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BLOSSOMING AT COLLEGE
Stuewe, 52, says he grew up in the shadow of a brilliant older brother whom he involuntarily followed to Kansas State University. (The brother eventually became a nuclear engineer.) Randall had wanted to attend the University of Kansas, which cost $150 more a year, but his family said it would withhold financial support if Randall became a KU Jayhawk. The reluctant Wildcat did poorly in electrical engineering, made all the worse because professors expected him to be a whiz like his sibling, and in his first year he was kicked out of a fraternity, saying frat life just wasn’t his style.
Switching to finance, he blossomed at KSU. “I learned that if I found something I liked,” he says, “I could be very good at it.” Managing to work his 2.17 GPA up to 3.54 by graduation, he attracted job offers from IBM, Union Pacific, Commerce Bank of Kansas City, and Cargill. He chose the last, even though it offered a starting salary of $17,000 a year, $4,000 less than Big Blue’s promised wage. He didn’t regret it, saying he had “great bosses” at Cargill, where he worked in global commodities such as bulk fats and vegetables oils, dealing in everything from sales to trading.
After 12 years, Stuewe felt he wasn’t making enough career progress and found the corporate culture wanting, to boot. “At Cargill, decisions weren’t made; decisions evolved,” he says. “There was no urgency to deliver.” This bred a culture of bureaucratic complacency, he says.
It was a much different story at ConAgra, a publicly traded company where evaluations occurred every 90 days. “You get in a room, see the facts, make a decision, and go,” Stuewe says.
His big break at ConAgra came with garlic. In 1999, three years after being hired, he was put in charge of ConAgra’s ailing garlic and onion processing unit, Gilroy Foods, in California’s Santa Clara County. He acquired a near-bankrupt competitor, streamlined the supply chain, and settled a two-year Teamsters strike, which led to a 25 percent hourly workforce reduction. Soon, Gilroy Foods was the world’s largest producer of high-quality dehydrated ingredients.
The sense of triumph was short-lived. New leadership at ConAgra disliked the legacy of autonomous units, and decided to order unit chiefs like Stuewe to relocate to ConAgra headquarters in Omaha, Nebraska. Stuewe’s family didn’t want to leave their home in Monterey, California, where they’d settled. “This is a California-based agricultural business; this is its roots,” Stuewe recalls arguing to higher-ups in the Omaha office. “It makes no sense and, if you want to do that, I don’t want any part of it.”
In time, five presidents of ConAgra operating companies were let go. Seeing the writing on the wall, Stuewe quit. The lesson he took away from the episode would be, years later, to make Darling “very decentralized, with entrepreneurship” at the lowest levels. “We’ll set the strategy,” he summarizes the mindset, “but you’ll make the decisions necessary at the field level.”
Stuewe cleared out his office, then found himself walking in his backyard with a small box of mementoes. “I just broke down and cried,” he recalls. “I was very proud of what I had built at Gilroy and felt someone had taken it away from me… [After] you start feeling sorry for yourself, you start thinking about how not to put yourself in that position again.”
He began working his network of former colleagues but found that, after a month, acquaintances became less sympathetic, less eager to help. He had nine months of severance pay: “I used up 90 days and was feeling sorry for myself.” With a drop in the property market, his house was underwater, he had no job, and he hadn’t composed a résumé in 18 years.
Asked whether he’d sought clergy or other counseling, Stuewe replies, “Jack Daniel and Johnny Walker did fine. … People say [adversity] will make you stronger,” he adds. “I don’t know if it makes you stronger, but it tells you that you don’t want to go there again. I found myself in a duck blind in Kearney, Nebraska, with my brother, and had to borrow $5,000 to stay afloat. I’ll never forget how very close I came to hitting bottom.”
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A MAJOR COUP
Then, finally, Stuewe got a break. Chuck Adair, a mergers-and-acquisitions specialist with a Canadian bank in Chicago, heard Darling was looking for a CEO. Adair said he knew the Darling board wanted a fresh start with someone who didn’t have to be tutored on commodity markets and logistics. Stuewe, Adair told a contact involved in the search, “had those building blocks, had passion, and knew the plumbing of the business.” In addition, Adair says, Stuewe is “a regular guy from the middle of Kansas … a guy who is hard-working, Midwest honest, straight-shooting, and fun-loving.”
Stuewe has remained personally engaged at Darling, even though his dance-card of goals has been punched.
Then, bad news came during his second week at Darling. Stuewe’s real job, he was told, was to keep the company running until a buyer could be found. He could be out of work again, it seemed, in less than a year. The company informed shareholders that it was exploring “strategic alternatives” for Darling and hired Adair’s firm, BMO Nesbitt Burns (later named BMO Capital Markets Corp.), to find someone to acquire it.
Stuewe quickly appraised the business and began arguing that the company had excellent potential. “Guys,” he said, “you don’t know what you have your hands around.” Then something remarkable happened. Stuewe began producing financial results that impressed Wall Street, and the stock price began to climb. Meanwhile, all of the potential bidders were “bottom feeders,” he says, “some ‘all hat and no cattle.’ ” Soon there had been a nearly 100 percent turnover of stock, according to Stuewe, and the for-sale sign was pulled down.
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UPGRADING PERSONNEL
What he found from the get-go at Darling, Steuwe says, was that morale was “like a morgue. When I took over in 2003, it was tired and worn out—both the assets and the people.” He moved to change all that. Plants, starved by years of “financial engineering,” were cleaned up and repainted. Junk got hauled off. Trucks were replaced. “We upgraded the people at corporate and down at the plants, and decided to make it a fun place to work,” Stuewe says. (Today there’s a free hot lunch every day at headquarters, costing the company $5 a head, but keeping the employees on campus, saving them money.)
In 2003, Stuewe says, “the company hadn’t made a profit in years,” and a major challenge was getting lenders to trust Darling again. In early 2005, he negotiated new borrowing. Still, the company’s image remained tarnished. When Stuewe invited 44 banks to a presentation, “only five were left in the room after 45 minutes. I cleared the room.” But the remaining five extended credit at better rates.
Its house newly in order, the improved relationship with banks gave Darling the ability to acquire National Byproducts, a former rival, in 2006 for $141 million—half borrowed, half in stock. “That’s the deal that changed the world for us,” Stuewe says, “because we [had been] the irrelevant little guy … We had done the best we could. But for me, it was either, now’s the time to sell the company—or grow the company.”
National, the rendering unit of Tyson-owned Holly Farms until a leveraged buyout, had about $28 million EBIDTA at the time, Stuewe says. “The synergies of working together, shutting a few [non-performing or redundant] plants, rerouting trucks, meant that within a year we had $100 million EBIDTA,” he says.
Adds Adair: “This was the first tipping point for Randy as CEO of Darling, carrying off his first creative acquisition. He proved he could integrate an acquisition with a lot of hard work and face time and listening.”
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WOOING A RIVAL
The 2010 acquisition of Kentucky-based Griffin Industries, Darling’s biggest U.S. competitor, was unlike anything Stuewe had ever encountered. For generations, the Griffin family detested anything to do with Darling. There was litigation between the two renderers—and worse. John L. Griffin, a high-school dropout, started the business in 1943 by collecting dead farm animals in a second-hand furniture truck with chairs still painted on the side. According to a 2004 company profile, Darling had made heavy-handed attempts to buy out Griffin in the 1940s, at one point threatening to ruin the founder if he didn’t cave in.
Prospering through acquisition and organic growth, by 2010 Griffin Industries was employing 1,400 people at 12 rendering plants, nine bakery byproduct facilities, and a biodiesel refinery in 18 states. It also owned a 5,500-ton freighter used to ship tallow to Latin America.
Although the Griffins’ dislike for Darling, by now its biggest rival, was palpable, there was practically no one left at Darling who knew what originally had caused the long-standing animosity, Stuewe says. Darling was about the same size as its rival in 2010, but Griffin was more profitable. One of the Griffin brothers wanted to retire, leaving two in the business. Other family members wanted a cash sale—“not just a dividend check,” Stuewe says. “They were tired.” In order to keep Griffin running, the two remaining brothers would have had to take on considerable debt, so they decided to seek a deal instead.
“The big issue for them was to make sure the third generation of kids could continue to have careers and opportunities, to make sure the culture allowed for that—maintaining their work ethic, culture, and values,” Stuewe says. “I was being interviewed by the family about how their legacy would be protected.”
As part of the $840 million takeover—$100 million in stock, $740 million in debt—Stuewe concluded “lots of handshake agreements” to honor the Griffin culture by transferring the best of the two companies to the combined enterprise. The Griffins ran clean, efficient plants with excellent biosecurity. “I believe in entrepreneurial behavior, that you can’t drive this boat from the helm,” Stuewe says. “The Griffins, because it was their money, had been very centralized. That was the challenge in putting the companies together. Frankly, I came to the conclusion that we could be more efficient by being more centralized, and they agreed that they probably needed a little better caliber person at the plants.”
Today, one Griffin brother is co-chief of operations, and another is Darling’s No. 2 counsel. A nephew runs sales and procurement, and other descendants are scattered about from clerical to management slots. The Griffins didn’t want a seat on the board, Adair says, but Stuewe wanted the two senior brothers to attend meetings as advisors. “It’s another illustration of how Randy put it together,” he says. The Griffin acquisition enlarged Darling’s presence in the used cooking-oil market and other sectors—and brought it into new ones.
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‘AN AWESOME SUCCESS’
“I was now nine and a half years into it,” Stuewe recalls. “I’d lived three lifetimes. Sometimes you ask yourself, ‘Is it time to leave?’ ”
Darling was doing about $1.5 billion in revenue. “We kind of lived in a world of our own. Life was good,” he says. “We were printing money. … I clearly had more money that I ever was going to need to live on. I just felt I wasn’t done.”
The one project Stuewe wanted to see take off was a 50-50 venture with Valero Energy Corp. to build the country’s largest renewable diesel plant in Louisiana. The fuel would be 60 percent refined animal fat and kitchen grease and 40 percent corn oil recovered from ethanol production, Stuewe says. Unlike biodiesel, renewable diesel can be distributed via existing petroleum pipelines and won’t thicken or clog engines in cold weather. In all, some 11 percent of the country’s animal fat and used restaurant cooking oil is used in the production.
The Diamond Green Diesel plant, which cost $445 million to build, opened in July 2013. After 45 days, the facility was running nearly at capacity. The plant is estimated to earn $1 per gallon of renewable fuel it produces, with 137 million gallons produced annually. Stuewe calls the operation “an awesome success.”
Darling continued making acquisitions. Terra Renewal Services of Dardanelle, Arkansas, a wastewater renewal company, had been considered on and off for five years, and finally was purchased for $120 million. It added about $22 million in earnings. The Royal Bank of Canada was authorized to sell Rothsay, the rendering and biodiesel unit of Maple Leaf Foods. That transaction cost Darling the equivalent of $626 million, and added more than $70 million to its EBITDA.
An even bigger deal evolved from a chance meeting Stuewe had at a 2012 Christmas party in Manhattan. A banker with the Netherlands-based Rabobank asked what Darling was going to do with its cash on hand. “I don’t know,” Stuewe remembers replying. “Do you have anything for me to buy?” The Dutchman responded by asking, “Well, did you ever hear of VION Ingredients?”
The company, a unit of the VION Food Group, is Europe’s largest renderer, the world’s largest gelatin manufacturer, and one of the biggest suppliers of sausage casings. VION’s corporate parent was in forbearance, Stuewe soon discovered, owing an estimated 1.5 billion euros, and it needed to raise cash by spinning off the mammoth rendering unit. Meetings were arranged in Europe, where Stuewe struck solid friendships with VION managers. When it came time to auction the company, he not only knew VION’s financial state, but the strengths and weaknesses of the people who ran it. Darling won the second round of the auction with a $2.2 billion bid, using a combination of bank debt, public debt, and equity. It was Darling’s biggest acquisition ever.
Along with the Rothsay takeover, the deal would add $320 million of incremental EBITDA, basically doubling Darling’s bottom line. Previously Darling had no overseas presence; suddenly it had units in Canada, Europe, South America, and Southeast Asia.
If this were a business school case study, what lessons would be learned from Stuewe’s eventful tenure at Darling? For one thing, he was more than equipped for the job. He saw Darling’s worth when a raft of shareholders didn’t. He not only stayed on to expand the obscure renderer, but he had the skill set to build loyalty among a demoralized workforce—and to make acquisitions that ended up creating greater value. Finally, and crucially, Stuewe has remained personally engaged, even though his dance-card of goals has been punched.
“Randy has transformed Darling from a broken-down commodity business to a global ingredients business—food, feed, and fuel,” says Adair. In 2003, he adds, “there were not a lot of people lining up to take the CEO job. There would be today.”
