Kristen Bell's Bankrupt Startup Hello Bello is now Being Rescued by a Private Equity Firm
Hello Bello, a company specializing in diapers and baby products co-founded by actors Kristen Bell and Dax Shepard, has initiated Chapter 11 bankruptcy proceedings. Everything you need to know about them and what went wrong.
What exactly is Hello Bello?
In 2019, Kristen Bell and Dax Shepard co-founded Unconditional Love Inc., which operates under the brand name Hello Bello, with a mission to create eco-friendly diapers and baby products. Their dedication to sustainability and quality quickly gained traction in the market. In 2020, Hello Bello attracted an investment from the private equity firm VMG Partners, signaling the company's potential for growth. By 2021, Hello Bello had become a prominent direct-to-consumer diaper brand, boasting a subscriber base of 130,000 and achieving a remarkable milestone of $200 million in net sales.
What is the ownership structure at Hello Bello?
Kristen Bell and Dax Shepard collectively possess a 13.26% stake, with each of them owning 6.63%. Jay McGraw, the son of Dr. Phil, holds a substantial 24.6% interest in the company. The private equity firm VMG holds a 25% ownership stake, and the STK NEVADA TRUST is indicated as the holder of 22% of the company's shares.
What were the challenges that the firm faced?
Bell and Shepard initiated Hello Bello after examining diaper choices for their two daughters, expressing dissatisfaction with the available options. They formed a partnership with McGraw and Sean Kane, who had previously co-founded Honest Brands alongside Jessica Alba. The company made its debut exclusively at Walmart, with a presence in 4,700 stores, offering competitive pricing in comparison to other alternatives, since the diaper industry is renowned for its high costs and challenges. Hello Bello made the strategic decision to take on diaper manufacturing themselves and established a facility in Waco, Texas, with support from Chip and Joanna Gaines, well-known HGTV personalities.
Despite achieving remarkable sales figures, Hello Bello encountered difficulties in meeting operational expenses and other financial obligations associated with the business.
How did Hello Bello become bankrupt?
Hello Bello attributes bankruptcy to elevated shipping expenses, heightened purchase costs, and the delayed delivery of essential raw materials for their product manufacturing.
In their voluntary bankruptcy application, Hello Bello disclosed an estimation of assets and liabilities surpassing $100 million. The application also revealed that the company has over 200 creditors and furnished a roster of the 30 most substantial unsecured claims. The largest of these claims is asserted by Irving Consumer Products, a tissue manufacturer, seeking payment of over $22 million. It's worth noting that Hello Bello is currently contesting this claim. For the fiscal year concluding on January 31, 2023, Hello Bello reported approximately $179 million in sales and a negative EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) amounting to -$15 million.
Hello Bello to be acquired by Hildred Capital Management
After ending up in trouble, Hello Bello is being acquired by Hildred Capital Management, a healthcare-focused private equity firm. To facilitate this, Hello Bello has filed for Chapter 11 bankruptcy and is seeking approval for the sale. The Company's secured lenders will provide financing for the process, expected to conclude in the next few months.
What's next for Hello Bello?
Hello Bello has submitted standard first-day motions to the Bankruptcy Court, seeking authorization to maintain its operations during the Court-supervised sale process. This includes paying employee wages and benefits as well as key vendors and suppliers. These requests are expected to be approved by the Bankruptcy Court, reducing the impact on Hello Bello's customers, employees, and stakeholders.
