Single bidder offers $9.5 million for Simply Essentials; trustee seeks permission to sell

By Bob Steenson, bsteenson@charlescitypress.com

A single bidder took part in a bankruptcy auction of Simply Essentials assets last week, and the bankruptcy trustee has recommended that the closed facility in Charles City be sold to a U.S. subsidiary of a Jamaican chicken company.

The sale has been described as “turnkey,” with the idea that the purchaser will reopen the business in Charles City as a chicken processing plant.

A hearing has been set for 1:30 p.m. Friday, Sept. 3, in the U.S. Courthouse in Sioux City to hear any objections to the sale and likely take action on the motion to sell the assets.

The auction Wednesday morning had potentially involved two bidders — Pure Prairie Farms Inc., a new company that included some of the farmers who had provided chickens to Simply Essentials, and International Poultry Breeders, doing business as The Best Dressed Chicken.

But bankruptcy trustee Larry Eide, a Mason City attorney, said in motions filed in U.S. Bankruptcy Court Friday afternoon, that Pure Prairie Farms had not participated in the auction.

Eide said that last Monday afternoon, Aug. 9, he had received an email from the attorney for Pure Prairie Farms, saying in part, “in light of the overbid of The Best Dressed Chicken, Pure Prairie will not be participating in further bidding. I believe that holding an auction is no longer necessary under those circumstances, and I wish you well in closing the sale with Best Dressed.”

Pure Prairie Farms had initially made what Eide said was the best offer for the closed Charles City chicken processing facility, for $9.5 million, and Eide had accepted that offer.

But then Wincorp International Inc., which is owned by Jamaica Broilers Group Ltd., made an offer for $10 million and filed an objection to the sale to Pure Prairie Farms, which ultimately led to the auction being scheduled for last Wednesday.

Wincorp International Inc. is a company set up in the United States by Jamaica Broilers Group to facilitate the company’s operations in this country. International Poultry Breeders is a division of Wincorp, and sells chicken in the U.S. under The Best Dressed Chicken label.

Eide wrote in his motion filed Friday, “… the trustee’s brokers had numerous conversations with the representatives of Pure Prairie and attempted to contact Pure Prairie additional times without success, with the communications and attempted communications continuing all the way up until shortly before the commencement of the telephone auction.”

Pure Prairie Farms had also not met one of the conditions for potential bidders, that it provide by 5 p.m. Aug. 9 proof of financial ability to complete the sale. The Best Dressed Chicken had provided proof of financial ability, Eide said.

“Pure Prairie did not request to participate in the auction and did not participate in the auction,” Eide said.

After the situation was explained to the parties listening in to the telephone auction, the trustee’s broker asked for a bid of $9.7 million, Eide said.

But the attorney for International Poultry Breeders (IPB) said that only a bid of $9.5 million was required because Pure Prairie Farms had not met its obligation to become a qualified bidder, and so its initial offer of $9.5 million was no longer valid.

“Following discussion and the further solicitation of a higher bid, with none being received, the trustee accepted the bid of $9.5 million from IPB subject to court approval,” Eide wrote in his motion asking the bankruptcy court to grant that approval.

“No objection or opposition was voiced by any party who attended or was represented at the auction,” Eide wrote.

The Press had requested access to listen to and report on the auction, but was told that only “bidders and principals” would be allowed to be on the call. The first information available about the result of the auction was included in two motions that Eide filed Friday afternoon in the U.S. Bankruptcy Court for Northern Iowa.

In his motion asking the bankruptcy court to approve the sale, Eide asked that the judge order that the gross proceeds be used to cover “any and all liens, claims, titles, encumbrances, interests, and rights,” including those claimed by the Federal Agriculture Mortgage Corp. (Farmer Mac) and Pitman Farms Inc.

Farmer Mac holds a first mortgage of more than $18 million on the assets, and Pitman Farms, the California company that had purchased Simply Essentials in 2017 and closed it in 2019, holds a mortgage of almost $5 million on a parking lot and live barn.

Eide noted that Farmer Mac and Pitman Farms had agreed that property taxes and transfer fees would be paid from the gross sales proceeds, and that compensation to the brokers would be paid from gross proceeds.

The broker, Heritage Global Partners, will receive a commission of 5% of the gross sales price, or $475,000, plus expenses.

A sum equal to 0.75% of the gross proceeds, or $71,250, will be set aside for payment of administrative claims and expenses, with any amount left over available for payment toward unsecured claims.

Eide wrote that the sale to IPB “is in the best interest of the estate, the creditors and the community.”

“This is so because a sale will generate much-needed cash to enable the trustee to administer this case, and will hopefully enable IPB to use the assets in the operation of a business for the good and benefit of IPB, and to the betterment of the community and the public interest,” Eide wrote.

The sale includes real estate at 901 N. Main St. and 300 Lawler St., and all of the equipment and other “tangible personal property” located at those sites, as well as “certain intellectual property and intangible property.” It does not include more than a dozen semis and trailers that will be sold separately.