Cagle’s Inc. (CAGAQ:US) is seeking court permission to sell virtually all of the poultry producer’s assets at a bankruptcy auction after accepting a bid valued at about $72.3 million from an affiliate of Koch Foods Inc.
Cagle’s will ask U.S. Bankruptcy Judge Joyce Bihary in Atlanta, where the company is based, for approval of guidelines to govern the proposed auction at a hearing scheduled for April 4, according to an order filed yesterday.
The agreement with closely held JCG Foods LLC “will be ‘tested’ in the marketplace” through the auction process “to ensure that the estates realize the maximum value” for the assets, Cagle’s said in a March 23 court filing.
Cagle’s wants to hold an auction on May 10 followed by a hearing the next day to seek approval of the sale, according to court papers. Rival bidders would have until May 4 to submit offers under the proposed timetable.
“It’s a nice strategic fit,” Joe Grendys, who owns both Park Ridge, Illinois-based Koch Foods, the seventh-largest U.S. chicken producer by pounds, and JCG Foods, said today in a telephone interview. The deal would give Grendys a broader customer base and more supply. Cagle’s assets include two processing plants, a feed mill and a hatchery.
JCG Foods agreed to pay $37 million plus the value of inventory and accounts receivables, which stood at about $43 million as of Jan. 28, and minus post-bankruptcy payables and accrued expenses that totaled about $7.7 million, according to court documents.
About $55 million would be paid in cash and the remainder would be paid with a promissory note guaranteed by Grendys, according to court papers.
Cagle’s sought court protection on Oct. 19, listing more than $50 million in assets and less than $50 million in debt in its Chapter 11 petition. Koch Foods was among companies that cut production last year amid rising feed costs, weaker consumer demand and lower prices for chicken products. Other chicken processors such as Cagle’s, Allen Family Foods Inc and Townsends Inc. entered bankruptcy and worked to sell assets.
U.S. chicken processors on average lost 10 cents a pound in 2011 and have returned to profitability this year, according to a report today by Stephens Inc.
The case is In re Cagle’s Inc., 11-80202, U.S. Bankruptcy Court, Northern District of Georgia (Atlanta).
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