A South Korean poultry company placed the winning bid of $48 million to buy the assets of Allen Family Food during an auction held July 25.
Allen's assets were sold during an auction lasting about 12 hours, said Richard Robinson, Wilmington-based attorney for Harim. If approved, Harim will also purchase Allen inventory at a price over the bid amount of $48 million. Harim, a company new to Delaware, outbid Mountaire Farms of Delaware for the Seaford-based poultry operation.
According to the law firm, the Honorable Kevin J. Carey, a New Castle County bankruptcy judge for the United States Bankruptcy Court, indicated at a hearing July 27 that he will approve the sale, possibly by mid-August.
“This transaction will allow Harim to enter the global food market in the U.S. and to build on Allen’s rich tradition and history as a leader in the industry,” said Hong Kuk Kim, chairman of Harim Group, in the release. “We intend to combine and leverage Harim’s world-class experience and manufacturing capabilities with Allen’s great reputation for almost 100 years in the region to become one of the world leaders as a vertical integrator in the chicken market. Through our knowledge of Asian consumer preferences, we plan to expand product offerings to include premium, value-added products that can be sold throughout the United States and Asia. We also look forward to maintaining strong relationships with the local communities and customers where Allen operates and to help establish stronger and more efficient operations in those markets.”
While the sale will not be finalized until mid-August, poultry workers are expressing happiness that many jobs will be saved.
Delaware Agriculture Secretary Ed Kee said he is hearing from growers that the sale will keep chickens and employment in Harbeson, but specifics are still unclear at this time.
"The sale leaves some uncertainty, but we are pleased it is happening because it keeps workers in business," Kee said. "The general feeling is wait and see, but it looks like once the sale goes through, they will have one shift at Harbeson. Then in a couple months, once production ramps up again, it will grow into an additional shift. I think there will be jobs in Harbeson for some time to come."
Charles Allen, chairman of Allen Family Foods said he believes the sale is a good move for the company, its employees and the industry. Harim may also continue the Allen brand by keeping the name in place, Allen said.
“We believe that Allen’s assets, Allen’s established brand name among customers and contract farmers and its long-term history in the region make the transaction a great opportunity for Harim and the local communities," Allen said in a statement. "With Harim’s ability to leverage the growing Asian market and its healthy balance sheet, the future is very bright.”
Mountaire Farms of Delaware also bid on the Allen assets, but the company did not place the winning bid, said Chris Shigas, public relations spokesman for Mountaire.
“Mountaire wishes the best for the Allen family and everyone at their companies," said Shigas in the release. "Mountaire Farms will continue with its plan to expand facilities. As soon as practical, the company will be adding jobs in the community under an expansion plan looking to add employees, growers and other service needs. Driven by its deep-rooted commitment to quality service and value, Mountaire Farms looks forward to future business growth and strengthened ties with the communities in which it operates.”
After more than 90 years in business in Sussex County and beyond, Allen Family Foods filed for bankruptcy protection June 9 in New Castle County.
The poultry producer has facilities in Delaware, Maryland and North Carolina, employing more than 2,000 people between the processing facility in Harbeson, Allen’s Hatchery operations and JCR Enterprises locations affiliated with Allen Family Foods.
The Allen company owes more than $83 million to creditors, including MidAtlantic Farm Credit and M&T Bank, which purchased Wilmington Trust, one of Allen's lenders.
Keith Cooper, chief restructuring officer for Allen’s, did not return calls at press time.
Area poultry producers, including Laura and Roland Hill of the Angola area, have been signing on to grow chickens for Mountaire. Because Mountaire is expanding in the region, many producers could find work even if the Harbeson processing plant closes, said Mike Tirrell of Mountaire Farms.
The poultry industry as a whole is facing challenges as the cost of grain continues to rise, said Tirrell. While the Allen company had to sell, Tirrell believes Mountaire will continue to thrive on Delmarva, stating the company believes the investment in an expansion now will pay off later when grain prices go down.
"It is terrific news for Delaware that hundreds of our neighbors who have worked at Allen Family Foods will be able to keep their jobs thanks to this sale," said U.S. Sen. Chris Coons. "The best way to strengthen our communities is to ensure that more and more Americans have access to good, quality jobs, and this deal does just that. This outstanding news - combined with Mountaire's planned expansion at its facilities in Millsboro and Selbyville - is a promising sign that the tide is turning for the job market in Sussex County."
This is not Harim's first attempt to enter the Delaware poultry industry. Just last year, the American arm of the South Korean poultry company placed a bid on Townsends Inc., which in the end was broken up and purchased by Omtron Ltd., a U.S. equity investor founded by Oleg Bakhmatyuk, Ukrainian entrepreneur, and Peco Foods Inc.
According to the Harim group website, Harim is an agri-food corporation in South Korea, producing chicken, pork and feed through 20 companies in Korea and 10 abroad in Vietnam, China, Phillipines and Indonesia. Sales total more than $3.5 billion annually and the company employs about 6,300 people, producing more than 700,000 chickens per day. For more information, visit www.harim.com.
Big chicken faces environmental challenges
Big poultry producers across the nation are facing challenges when it comes to purchasing grain to feed the birds, but environmentalists released a report July 27 stating chicken producers are not doing enough to decrease pollution.
The Pew Environmental Group highlights environmental concerns in its study titled "Big Chicken: Pollution and Industrial Poultry Production in America." In the report, Karen Steuer, Pew's director of government relations, states areas like the Delmarva Peninsula are bearing the brunt of pollution from an increased density of birds being produced here.
The report calls for large chicken companies to share the cost and legal responsibility for proper management of manure, Steur said. It also calls to put a cap on the number of chickens produced in a specific area.
Chicken is the most popular meat in America, with the average American consuming almost 84 pounds of chicken a year, Steuer said. The amount has grown considerably in the past 40 years.
Kee said the fact that chicken is now the top meat has a lot to do with the work growers, like those in Delaware, have done. He said the Pew report doesn't take into account what poultry producers have done to improve environmental conditions.
"I think the report is about posturing for publicity and fundraising," Kee said. "They talk about our state's industry without talking to anyone in the state."
In 2000, Delaware created a nutrient management commission, which has since overseen and created regulations for farmers in the state. Kee said the commission has come a long way to reduce runoff from fields by encouraging cover crops. Today, all farmers have a nutrient management plan in order to protect the environment, Kee said.
"The commission encourages best management practices to reduce what runs off fiends. It has made a difference and that wasn't taken into account in the Pew report," Kee said. "Some of the recommendations they make in the report, we have already taken care of here."