Maschhoffs to acquire U.S. assets of AgFeed

Maschhoffs to acquire U.S. assets of AgFeed

- AgFeed filed for bankruptcy protection July 15. - Maschhoffs to pay $79m for U.S. assets. - Combined operation could become nation's

UNDER an agreement filed last week in the U.S. Bankruptcy Court for the District of Delaware, the fourth-largest hog company in the country will acquire the U.S. assets of pork producer AgFeed Industries.

The Maschhoffs, a family-owned firm based in Carlyle, Ill., signed an asset purchase agreement with AgFeed for the amount of $79 million, pending court approval.

AgFeed's voluntary filing for Chapter 11 protection on July 15 comes on the heels of a string of setbacks for the firm, which produces pigs in the U.S. and China.

The company recently settled a running dispute with Hormel Foods in which it agreed to wind down its supply contract with the processor. A $7.9 million arbitration ruling in Hormel's favor earlier this year led to a default under AgFeed's $68.5 million credit facility that hasn't been paid since its February maturation.

According to court filings, AgFeed supplied more than 1.3 million hogs to Hormel in 2012, substantially all of the hogs produced annually through AgFeed's system of breeding facilities in Colorado, Oklahoma and North Carolina and its contract finishing facilities in Iowa. The company reported 2012 revenues of $224 million.

AgFeed's financial follies first surfaced last year, when the company said it would have to restate financial statements dating back to 2007 following a probe into accounting issues with its animal nutrition and Chinese hog operations.

The company's Chinese assets, while on the market currently, are not part of the asset purchase agreement with The Maschhoffs.

Records indicate that AgFeed's Chinese operations include 21 commercial farms and five feed mills in China that produce more than 250,000 hogs per year. At one point, the company was one of the largest feed producers in China.

According to the purchase agreement, The Maschhoffs will acquire substantially all of AgFeed's U.S. assets, including the M2P2 operation purchased in 2010. M2P2 includes 10 sow farms and two feed mills.

Company spokesperson Julie Maschhoff told Feedstuffs that the company couldn't comment on the transaction and was awaiting court approval.

With the filing in the U.S. bankruptcy court, the transaction will be subject to a customary court auction to determine if other firms are willing to pay more than $79 million for the AgFeed assets. Pending court approval, The Maschhoffs said it would expect the transaction to close in the third quarter of 2013.

The Maschhoffs is one of the largest pork producers in the U.S. and one of the nation's largest independent, family-owned livestock operations. It owns 208,000 sows, produces market hogs in nine states and partners with 460 contract growers.

Once completed, the transaction will likely place The Maschhoffs as the third-largest hog company in the U.S., based on sow numbers.

At an estimated 27,600 sows, AgFeed was among the 25 largest hog companies in the country; combined with The Maschhoffs' existing herd, the resulting 235,000 head would surpass Seaboard Foods' 217,000-head sow base.

Volume:85 Issue:29

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