By Dave DeWitte, The Gazette
CEDAR RAPIDS — A bankruptcy sale of Agriprocessors is expected to go ahead without a lead bidder after an Israeli company’s $40 million offer for the Postville meatpacking company fell through.
Soglowek Nahariya Ltd. emerged last month as the “stalking horse” bidder for the assets of the Postville meatpacking concern, which was placed under bankruptcy protection by its owner, Abraham Aaron Rubashkin, in November 2008.
Under the bidding procedure, Soglowek’s $40 million offer was to be the foundation for further bidding for the assets of the company by other companies in a court-administered auction.
Soglowek couldn’t complete an asset purchase agreement in time to meet a deadline this week because the company hadn’t completed its due diligence, according to Joseph Sarachek, court-appointed trustee for the Agriprocessors bankruptcy.
Sarachek told The Gazette after a bankruptcy hearing Tuesday that the problem was the multitude of equipment leases, vendor agreements and purchase agreements that had to be evaluated and potentially renegotiated to determine how much Agriprocessors was worth.
“It is mind-boggling,” Sarachek said.
Sarachek said Soglowek remains “engaged” in the purchase process despite having no firm agreement. He said four or five companies are serious about buying Agriprocessors, including one “very sophisticated” potential buyer that emerged only Tuesday.
If another stalking horse bidder does not emerge, the sale will go ahead as a straight auction, Sarachek said. Companies will submit bids in advance using a standardized form, and be able to raise their bids on the date of the open auction.
The target date for the auction is March 23, Attorney Mark Childers, who represents the trustee, said Wednesday in court.
Soglowek makes meat products, meat substitutes, frozen baked goods, and vegetarian products, with annual sales estimated at $175 million. It is reported to be working with an unnamed U.S. partner on the deal.
Chief Bankruptcy Judge Paul Kilburg Wednesday approved a $25 million financing agreement between the trustee and First Bank Business Capital of St. Louis to cover Agriprocessors’ borrowing needs up until the time of sale.
Creditors, meanwhile, exhibited a growing degree of anxiety at the likely shortfall in sale proceeds to cover the amount they are owed by Agriprocessors.
MLIC Asset Holding, which is affiliated with Metropolitan Life Insurance, was wondering how much of the $11.5 million it is owed on real estate and equipment at Agriprocessors it would get from the sale.
MLIC objected to the sale procedure proposed by the trustee, saying in a motion that there was no showing that the $40 million offered by Soglowek was reasonable, and that the time frame for the sale did not allow it to be adequately advertised.
MLIC also said it would object to any offer that does not state how much the buyer will pay for the real estate and equipment collateral in which it has an interest.
After hearing several requests for a preset allocation of sale proceeds, Judge Kilburg declined to cancel or modify the sale. Instead, he directed that the creditors meet to develop a proposal for how the sale proceeds would be divided.