Olymel LP is the stalking horse bidder for the assets of hog company Big Sky Farms, according to court documents filed by the receiver, Ernst and Young.
The processor will bid $65.25 million for the Canadian assets of the Saskatchewan-based hog operation, plus or minus adjustments depending on factors such as hog inventory and accounts receivable.
Big Sky entered receivership owing about $69 million to secured lenders and another $8.4 million to suppliers.
In the United States, the receiver is feeding out and delivering to slaughter Big Sky’s hog inventory, which is currently estimated at about 50,000 hogs, with a view to winding down the company’s business in Iowa and other locations.
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The documents said the receiver believes a stalking horse process, in which a buyer is selected to make the first bid in order to maximize a troubled company’s assets before a bankruptcy sale, will instill more confidence in an industry reeling from Big Sky’s woes and the fact that Puratone in Manitoba is also under court protection from its creditors.
“There is noticeable angst amongst some of Big Sky’s suppliers in light of widely publicized industry conditions and as numerous of the Big Sky suppliers were also affected creditors as part of the CCAA proceeding in 2009,” the document said, referring to a restructuring process.
It noted that employees are key assets and the value of the business would erode without their support.
“The SH sales process, and a SH agreement approved by this honourable court as part of that process, will instill confidence in the employees that Big Sky will continue as a going concern subsequent to the receivership proceeding.”
Ernst and Young sought a stalking horse bidder with strong knowledge of the industry, familiarity with Big Sky, sufficient financial resources and a dependence on a continued supply from Big Sky.
Two parties were involved in advanced discussion. The other was widely reported to be Maple Leaf Foods.
The court will be asked to approve Olymel’s bid on Oct. 19.
