Charlotte, NC (The Charlotte Observer) A Ukrainian billionaire is poised to buy the assets of N.C. chicken processor Townsends in a $24.9 million deal that is the latest sign of how globalization and rising food prices are reshaping one of the state’s biggest industries.
Townsends, which employs roughly 1,200 people in Chatham County and has contracts with hundreds of chicken farmers, filed for Chapter 11 bankruptcy in December.
After more than 100 years in business, the Delaware-based company was felled by rising grain costs and the declining price of chicken.
Late last week, a bankruptcy judged approved the sale of Townsends’ Delaware headquarters and its North Carolina operations to Omtron. The deal is expected to close today.
Omtron is a U.S. shell corporation created by Oleg Bakhmatyuk, a Ukrainian businessman who owns food, transportation, real estate and financial companies.
Bakhmatyuk is also the largest shareholder in Agroholding Avangard, Ukraine’s leading egg producer.
Omtron will retain the Townsends name and doesn’t expect to lay off any employees, CEO David Purtle said on Thursday.
“All the contracts with the growers will be upheld,” he said.
Townsends’ bankruptcy caused state and local officials to investigate ways to make the company’s North Carolina operations more attractive to potential buyers.
Most of those efforts focused on ways to reduce operating costs at the company’s facilities in Chatham County and Mocksville.
N.C. Commerce officials made clear any buyer would probably qualify for grants to help offset the cost of running natural gas lines to Townsends’ two feed mills and a hatchery around Siler City.
The N.C. Ports Authority was also consulted on the feasibility of Omtron using North Carolina’s ports to export processed chickens to the Ukraine and to import and store feed from Ukraine.
Purtle said Omtron expects to ask Chatham County officials for additional incentives.
“We’re probably going to ask the local community to help us with some of the water costs and some of the infrastructure costs so that we remain a competitive position,” he said. “Basically, what we want is to make sure we’re competitive on the world market.”
Many small and midsize poultry companies have found it increasingly hard to compete, primarily because of rising commodity prices.
Corn, the main ingredient in chicken feed, has doubled in cost since last summer.
The increase is a result of a range of factors.
Floods in Australia and a drought in Russia have hurt supply. Meanwhile, demand for corn as food is rising in places such as China at the same time that it is being used to produce ethanol fuel in numerous countries.
“There are a lot of competitors out there buying the same product, so that drives up the price,” said Robert Hosford, an international trade specialist with the state’s Department of Agriculture.
The problems in the poultry industry are giving many foreign companies with global aspirations an opportunity to gain a foothold in the U.S. market.
For Townsends, the Omtron deal provides an infusion of capital and the potential to expand into new markets.
The deal is unique in that Bakhmatyuk will now own both a chicken processing operation in North Carolina and grain supplies in Ukraine.
“That is very unique,” said Michael Goodman, a managing partner with SSG Capital Advisors, the Philadelphia investment bank that handled the sale of Townsends’ assets. “I’m not aware of any major poultry producers that own their own corn fields.”
How exactly Townsends will be integrated into Bakhmatyuk’s other operations remains to be seen. The cost of shipping grain from Ukraine to the United States would seem to be prohibitive unless somehow it was purchased below the price being paid on the world market.
“I think people are now looking creatively at different models to insulate themselves from the volatility of the price of corn,” Goodman said.Courtesy of the Charlotte Observer. Written by By David Bracken.