Three firms divvy up bankrupt AgFeed

Published on: Aug 30, 2013
AgFeed Industries, based in Hendersonville, Tenn., will sell its U.S. operations to High Plains and Cohoma Pork, owned by TriOak Foods, and Murphy-Brown, a subsidiary of Smithfield Foods.
AgFeed Industries, based in Hendersonville, Tenn., will sell its U.S. operations to High Plains and Cohoma Pork, owned by TriOak Foods, and Murphy-Brown, a subsidiary of Smithfield Foods.

DESPITE setting the opening bid for embattled pork producer AgFeed Industries, The Maschhoffs will not be taking home the proverbial bacon; instead, AgFeed will sell its U.S. operations in a multiparty deal valued at more than $79.2 million. Winning bidders include High Plains Pork, Cohoma Pork, and Murphy-Brown, a subsidiary of Smithfield Foods.

AgFeed filed for voluntary Chapter 11 bankruptcy protection July 15 on the heels of a string of setbacks, and obtained approval from the court earlier this month to proceed with an auction of the company’s domestic assets. The Maschhoffs, one of the four largest players in the U.S. market, offered up the stalking horse bid, setting the floor for auction at $79 million.

The auction itself, however, left the Illinois-based firm on the outside looking in. After 14 hours and 35 rounds of bidding, AgFeed’s attorneys opted for the three-party plan instead of the original offer tendered by The Maschhoffs, saying the auction had added more than $12 million in value due to the terms of the deal’s structure.

According to court filings, the stalking horse bid included working capital provisions that would have reduced the actual price of the deal to $67 million; the winning suitors, on the other hand, offered less cash but a stronger net value. Terms of the transaction, approved by Bankruptcy Court judge Brendan Shannon, include $55. 2 million in cash, as well as $33 million worth of hogs already under contract for sale.

High Plains and Cohoma, subsidiaries of Iowa’s TriOak Foods, whill acauire AgFeed’s assets in Oklahoma and Colorado, while Murphy-Brown will take the company’s properties in North Carolina. The three groups will split AgFeed’s assets in Iowa.

Court documents indicate that TriOak’s entities are contributing $38 million in cash, while Murphy-Brown will pay just under $15.2 million for its piece of the pie.

Not everyone in the case will be made immediately whole by the sale, however. Farm Credit Services of America will receive an upfront payment of roughly $48 million of the $65 million owed, with the balance to be paid as the remaining hogs are sold later in the year. FCS would have been paid in full under the terms of the stalking horse bid.

For its efforts, The Maschoffs will receive a $2.4 million “breakup fee,” and reimbursement allowance of up to $800,000. The winning parties expect to close the deal in mid-September.

AgFeed’s troubles stem from a major dispute with Hormel Foods; earlier in the year the two companies agreed to end their long-term supplier/contractor relationship by the end of 2013.

The sale does not include the company’s several hog farms in China.