Bankruptcy court approves sale of closed Simply Essentials plant in Charles City

By Bob Steenson, bsteenson@charlescitypress.com

A U.S. Bankruptcy Court on Monday approved the sale of the Simply Essentials facility to a Minnesota company that includes former chicken growers for the closed Charles City chicken processing plant.

It is the same company – Pure Prairie Farms Inc. – whose bid for the facility had been originally accepted back in May, before a higher offer was received and an auction was held.

A company statement issued Friday said, “Pure Prairie Farms Inc. has signed a purchase agreement to purchase a chicken processing plant in Charles City, IA, from the trustee of the Simply Essentials bankruptcy. The plant, which has been closed since August 2019, is a state-of-the-art retail tray pack plant poised to capitalize on the growth and demand of premium poultry products.”

“This is an effort that has been in the works for a while and we are excited to be a part of bringing this plant back to life,” said Brian Roelofs, Pure Prairie Farms president and CEO. “We anticipate closing prior to year end.”

On Thursday, the trustee of the Simply Essentials bankruptcy action filed a motion in U.S. Bankruptcy Court for the Northern District of Iowa, asking the bankruptcy judge’s permission to sell the Simply Essentials assets to Pure Prairie Farms Inc. and to waive the usual 14-day waiting period for the sale to take effect.

A flurry of legal motions were filed on Monday, including motions withdrawing previous objections to a sale, and most importantly, an order signed by Bankruptcy Judge Thad Collins approving the sale by the trustee to Pure Prairie Farms Inc.

A hearing had been scheduled in U.S. Bankruptcy Court in Cedar Rapids for 11 a.m. Tuesday to act on the trustee’s motion to sell, but that hearing was canceled by the judge after he signed the order approving the sale.

Pure Prairie Farms Inc. was incorporated in Minnesota in June 2019. Its registered office address is in Fairfax, Minnesota, the same address given by its president and CEO, Roelofs.

Other officers are listed as Anita Janssen, secretary, and George Peichel, treasurer and chief financial officer.

The corporation was registered with the Iowa Secretary of State Office last Friday, Dec. 3. CT Corporation System of Des Moines is the registered agent.

This latest development approves the sale of the Charles City chicken processing plant to the same company and for the same price as an offer that had been made more than six months earlier.

Pure Prairie Farms had bid $9.5 million to purchase the assets of Simply Essentials in May. The trustee, attorney Larry Eide of Mason City, had accepted that offer, determining that it was the best of multiple bids that had been made for the property, and had filed a motion in June in bankruptcy court seeking permission to sell the company.

But shortly after accepting the Pure Prairie Farms’ offer, a bid of $10 million was offered by Wincorp International, which is owned by Jamaica Broilers Group Ltd., and which in the United States is International Poultry Breeders, doing business as The Best Dressed Chicken Inc.

Wincorp filed an objection to the sale to Pure Prairie Farms and Eide asked permission to hold an auction, selling the Simply Essentials assets to the highest bidder, with the opening bid set at $9.5 million.

But Pure Prairie Farms did not participate in the auction, and The Best Dressed Chicken offered an opening bid of $9.5 million and refused to go back up to its earlier offer of $10 million since no other company was bidding against it.

Eide asked the court for permission to sell the Simply Essentials assets to International Poultry Breeders for $9.5 million, but then a group of original petitioners in the bankruptcy proceeding and Pure Prairie Farms both filed objections, saying if the plant was going to be sold for $9.5 million, then Pure Prairie Farms’ original offer should be honored.

But most importantly, Pure Prairie Farms said in its motion objecting to the sale, Pure Prairie Farms would offer terms to contracted chicken growers that would be far more beneficial to the growers than the terms that The Best Dressed Chicken would offer, to the tune of an additional $3.5 million a year.

Since many of the growers were creditors of the bankruptcy estate, the judge should take their financial well-being into consideration when deciding on selling the plant, the motion said.

A hearing on various motions was set in September, but before that hearing could be held, International Poultry Breeders filed a motion saying that, based on the objections, it was withdrawing its offer so the assets could be sold to Pure Prairie Farms Inc., “the buyer of choice for such objecting parties.”

At that point Eide filed another motion, asking the judge to continue (postpone) the Sept. 28 hearing so he could seek to revive Pure Prairie Farms’ prior bid, address the objections that had been filed and figure out “the current status of this matter.”

The property for sale includes 3.1 acres at 901 N. Main St., where the Simply Essentials processing plant and offices are located, and 9.7 acres of property at 300 Lawler St., the location of a parking lot and live barn.

In addition, the sale includes “a 140-bird-per-minute CO2 stun, kill, scald, pick line, certain packaging and related equipment, and certain office equipment” and “various trademarks, website domain and other intellectual and intangible property which were owned and/or used by the Debtor in the operation of its business.”

The assets will be sold “free and clear of all liens, claims, encumbrances, obligations, liabilities, contractual commitments, or interests of any kind or nature whatsoever,” with the exception that rights to legal actions against the former owner of Simply Essentials by a former marketing company are not considered part of the sale.

“This order shall not be stayed and shall be and is immediately effective,” the judge’s order states. “Time is of the essence in closing the transactions referenced herein, and the debtor and the purchaser intend to close the transactions as soon as practicable.”

Eide’s original motion to sell filed Thursday says that Pure Prairie Farms has placed a $500,000 deposit on the purchase into escrow, and the remainder of the $9.5 million will be due at closing “by certified check or wire transfer.”

Eide has said previously that it was important for him to sell the property as a “turnkey” operation, that could be reopened as an operating business, because it would bring a higher price for the estate than if it were broken up and sold in pieces, but also because it would be better for the community.

The $9.5 million sale price is far less than what creditors say is owed by Simply Essentials.

The principal secured debt is a first mortgage held by the Federal Agriculture Mortgage Corp., known as Farmer Mac, for more than $18 million. Pitman Farms Inc. holds a second mortgage on the parking lot and live barn for almost $5 million, although court documents say that claim needs to be validated.

Pitman Farms, of Sangor, California, is the company that purchased Simply Essentials in 2017 and that closed the plant August 5, 2019, putting more than 500 employees out of work.

Eide filed other motions Monday, asking the court to approve returning International Poultry Breeders’ $500,000 deposit from the auction, and paying Farmer Mac 96% of the net proceeds from the sale toward its claim.

According to Eide’s motions filed in bankruptcy court, Farmer Mac and Pitman Farms have agreed that any property tax or real estate transfer tax due on the property will be paid out of the gross proceeds, as well as the compensation to the broker and agent who were hired to help with the sale.

They have also agreed to hold back 0.75% of the gross proceeds for the trustee to use for administrative claims, expenses and unsecured creditors.