Seneca Foods is one step closer to purchasing the canning division of Allens Inc., as the $148 million stalking horse bid for the Siloam Springs company was approved by bankruptcy judge Ben Barry after taking the matter under advisement earlier this week.
The court approval of the Seneca bid officially sets the stage and the clock for any potential suitors who want to try and purchase Allens’ assets from the bankruptcy court.
As previously announced, Allens entered into an asset purchase agreement under which Seneca Foods Corporation intends to acquire substantially all of the Allens canning operations in a court-supervised process under Section 363 of the U.S. Bankruptcy Code.
The asset purchase agreement sets the floor for an auction that is designed to achieve the highest or otherwise best offer for these assets. Allens also is seeking bidders for its frozen operations in Montezuma, Ga., and intends to sell the assets through the auction process.
On Jan. 7, the court approved the proposed bidding procedures and bid protections for the sale process. The court also set deadlines for interested parties to submit qualified bids to acquire substantially all of the company’s assets and set dates for an auction and sale hearing related to the sale.
Allens said it continues to operate the business in the ordinary course, focusing on its core canned vegetable markets. Although Allens employees have received notification that their jobs may be terminated as a result of the sale process, the company expects that the majority of personnel will be offered continued employment by the winning bidder.
“The court’s approval of the bidding procedures and bid protections is another important milestone in the process that is intended to maximize the value of Allens,” said Jonathan Hickman, chief restructuring gfficer of Allens. “We are encouraged by the continued interest Allens has received for our canning operations and other assets and we are committed to an outcome that provides the most value for our creditors.”
Bankruptcy documents show that Allens employs 1,173. Of that, 766 are hourly, 162 are salaried and 319 are temporary workers hired through staffing agencies.
Under the approved bidding procedures, interested parties must submit qualified bids to acquire the assets of the company no later than 5 p.m. on Jan. 27. In the event qualified bids in addition to the stalking horse bid are received, Allens will hold an auction on Feb. 3. The Court has scheduled a final sale approval hearing for Feb. 10, with the closing anticipated to occur shortly thereafter.
Second lien holders filed an objection to the terms of the stalking horse bid with the court citing excessive break-up fees should Seneca lose out to another bidder. The court ordered a $4.5 million break-up fee unless it is one of the second-lien creditors who wins the successful bid, and in that case the break-up fee would be $3 million, according to the court records.
According to the company website, Allens is a family-owned vegetable processing company that began as Allen Canning Company in 1926 near Siloam Springs. The company expanded production during World War II, and during the 1970s added several new brands to its portfolio, including Popeye Brand Spinach.
Allens officials made several moves in 2012 to shore up business, including a March 2012 announcement that Allens was selling six frozen vegetable brands to the French company, Bonduelle Group.
The company also announced in early 2012 that the company would move operations and 150 jobs from Van Buren into an Allens canning operation in Siloam Springs. The company’s Van Buren warehouse operation was expected to remain open.
Consolidating the canning operations came more than 30 months after Van Buren operations were expanded. In June 2010 the company announced a more than $20 million expansion that included a $13.5 million investment in the company’s Van Buren operation. The $13.5 million investment in Van Buren expanded the company’s capacity to process sweet potatoes.