Northern Beef Packers, the Aberdeen, S.D., beef processor that filed for bankruptcy protection last week, is set on finding a buyer rather than reorganizing. The company has been plagued by financial woes through the plant construction and launch, has been unable to find the financial backing to ramp up to full production, reports the Associated Press.
The company asked the court in Sioux Falls on Thursday to allow it to hire investment banking firm Lincoln International, which is now recommending a sale.
Chris Stradling, a mergers and acquisitions adviser with Lincoln, testified Thursday that his company would look for a "stalking horse" bid, in which one potential buyer makes an initial offer to set the floor for an auction that invites competitive bids.
"The most likely outcome is that someone else will own this business in a control position," Stradling said.
Northern Beef Packers secured land for the new plant in 2006, but financial problems led to delays, and the company did not begin slaughter operations until 2012. The production target was 1,500 animals per day, but finances have kept the company from reaching that target. Prior to declaring bankruptcy, the company delayed issuing paychecks to its employees, and it laid off the majority of its workers last week prior to shutting down production. The company has $138.8 million in liabilities and $79.3 million in assets.
"We didn't have the capital necessary to ramp up operations," said Bob Wright, Northern Beef's chief operating officer.
Since May, Northern Beef executives have been working with Lincoln to find either a buyer or additional investors to help Northern Beef purchase enough cattle to turn a profit. Stradling said new investors were weary of putting in money since there would be so many investors in line ahead of them.
"It was an unfavorable investment, ultimately, when you do the math," he said.
Once locally owned, Northern Beef Packers is 41 percent owned by businessman Oshik Song with 69 other Korean investors who each gave at least $500,000 under the federal EB-5 program that encourages foreign investment in exchange for qualifications to secure permanent residency.
Source: AP, Sacramento Bee