By Jamie Santo
Law360, Wilmington -- Bankrupt hog farmer AgFeed Industries Inc. on Tuesday announced a new buyer for its U.S. operations as a collection of companies combined to overtake the stalking horse bidder at auction with an offer valued at $79.2 million.
The offer from High Plains Pork LLC, Cohoma Pork LLC and Murphy-Brown LLC was tapped as the winner at a Monday auction, edging out stalking horse The Maschhoffs LLC, according to a notice filed in Delaware bankruptcy court.
AgFeed selected the triumvirate's bid, which includes less cash than The Maschhoffs' offer, after determining the deal provided a greater net value, the notice said.
AgFeed placed the net value of the winning bid at more than $79.2 million, a figure that accounts for a cash purchase price just shy of $54.2 million, adjustments for the payment of certain fees and expenses, and proceeds to be received from the sale and collection of assets not being acquired, according to the notice.
The Maschhoffs' offer, which includes a cash component of nearly $80.8 million, was deemed to have a net value of about $79 million after similar calculations, the notice said.
AgFeed selected the winning bid after consulting with advisers, the official committee of unsecured creditors, the official equity holders committee, and secured lender Farm Credit Services of America, according to the notice.
A sale hearing is scheduled for Thursday before U.S. Bankruptcy Judge Brendan L. Shannon.
Court-approved bid procedures allow AgFeed to consider a combination of piecemeal offers for its various assets, so it is unclear if High Plains, Cohoma and Murphy-Brown are pooling together or if each is acquiring individual properties.
Counsel for AgFeed was not immediately available for comment Tuesday.
The Maschhoffs were tapped as the back-up bidder, which AgFeed can fall back on in the event that the sale to the winning consortium doesn't close.
For serving as a stalking horse, The Maschhoffs are entitled to a breakup fee of just under $2.4 million and a maximum reimbursement allowance just short of $800,000, according to court documents.
AgFeed Industries, which breeds hogs in China and the U.S., sought court protection on July 15 with an agreement in hand to sell the bulk of its domestic operations — AgFeed USA LLC and related subsidiaries — to industry rival The Maschhoffs LLC for $79 million.
At the bid procedures hearing earlier this month, AgFeed attorney Robert S. Brady said that under the asset purchase agreement with The Maschhoffs, the $79 million price tag would be lowered by about $12.5 million to account for the hogs sold off since the deal was struck. The Maschhoffs would take on $5.1 million in assumptions, however, putting the total value at about $71.6 million.
Additional assets would be available to creditors as well, Brady said, since the deal does not include some $7 million in cash brought in by recent hog sales and AgFeed USA's facility in Oklahoma, which continues to be marketed.
Secured debt owed to Farm Credit Services of America would total about $69 million as of the end of August, he said.
AgFeed USA's troubles stem from a falling out with primary business partner Hormel Foods Corp., which provided about half of the young pigs the company raised and later bought back full-grown hogs, according to court documents. The parties have agreed to wind down their arrangement by the end of the year, and AgFeed stopped purchasing young pigs from Hormel on July 1.
AgFeed is represented by Robert S. Brady, Donald J. Bowman Jr., Robert F. Poppiti Jr. and Ian J. Bambrick of Young Conaway Stargatt & Taylor LLP.
The creditors' committee is represented by Sandra G.M. Selzer of Greenberg Traurig LLP and Jeffrey D. Prol, Timothy R. Wheeler, Beth L. Williams and Bruce S. Nathan of Lowenstein Sandler LLP.
Farm Credit Services is represented by Michael B. Schaedle and Regina Stango Kelbon of Blank Rome LLP.
The case is In re: AgFeed USA LLC, case number 1:13-bk-11761, in the U.S. Bankruptcy Court for the District of Delaware.
--Additional reporting by Matt Chiappardi. Editing by Philip Shea.
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