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NORPAC Foods, Inc. – Court Approves $155mn Sale to Oregon Potato Company After Last Minute Scramble Over Potential Liabilities


October 29, 2019 – Further to an October 28, 2019 sale hearing and absent any further bids beyond that of stalking horse bidder Oregon Potato Company (“OPC”), the Court hearing the NORPAC Foods cases issued an order approving the $155.0mn sale of substantially all of the Debtors’ assets to OPC [Docket No. 317].

All pretty normal, except it wasn't. On October 18th, OPC notified [Docket No. 303] the Debtors that they were withdrawing from their August 12, 2019 asset purchase agreement (tthe "APA") based on issues uncovered as part of their due diligence efforts. It has been reported that those issues related to regulatory and environmental concerns and the Debtors' inability to allay those concerns with requested documentation. The Debtors pushed back that the termination of the APA was not valid, was probably a negotiating tactic, and that in any event, they had other prospective buyers interested in parts of the Debtors' business.

It appears, however, that the sale may play out as anticipated and that the APA remains the operative sale document. It also appears that the fix is a Court approved (and highlighted) limitation on liabilities that would see OPC free of any legacy liability concerns. 

The sale order reads in part: "The APA provides that OPC will assume certain ‘Assumed Liabilities’ and take title to the Assets subject to certain ‘Permitted Encumbrances’ as defined in the APA…. 

Otherwise, OPC will take title to the Assets free and clear of all: 

  1. security interests, encumbrances, liens, and other interests, including, without limitation, judicial liens and tax liens (collectively, the “Liens”); and 
  2. liabilities and ‘claims’ (as defined by Section 101 of the Bankruptcy Code) now existing or hereafter arising, fixed or contingent, asserted or unasserted, legal or equitable, liquidated or unliquidated, including, but not limited to, those arising under, related to, or based on successor or transferee liability, express or implied warranties, environmental laws, union contracts, pension or other retiree benefit plans, or for any taxes arising, accruing, or payable under, out of, in connection with, or in any way relating to the operation of any of the Assets prior to Closing, except to the extent that 'claims' relate to any of the Assumed Liabilities or Permitted Encumbrances (collectively, the ‘Claims’). 

OPC would not have entered into the APA and would not consummate the Sale Transaction (i) if the transfer of the Assets were not free and clear of all Liens and Claims; or (ii) if OPC would, or in the future could, be liable for the Liens or Claims.

Pursuant to Sections 105(a) and 363(f) of the Bankruptcy Code, upon Closing, all of Debtors’ rights, title, and interests in the Assets shall be transferred to OPC free and clear of all Liens and Claims. The transfer will vest OPC with all rights, title, and interests in and to the Assets. Except as otherwise specifically provided in the APA and this Order, OPC shall have no liability of any kind or character for the Liens or Claims, including, but not limited to, under any theory of antitrust, environmental, successor or transferee liability, labor law, successor employer liability, de facto merger or joint venture, fraudulent conveyance, mere continuation, or substantial continuity, whether known or unknown as of the Closing, 

After the Closing, all persons and entities (as defined by Section 101 of the Bankruptcy Code) are forever barred, estopped, and permanently enjoined from asserting Liens or Claims against the Assets or OPC, or any of OPC’s successors or assigns. Following Closing, no holder of a Lien or Claim shall interfere with OPC’s title to, or use and enjoyment of, the Assets based on or related to such Lien or Claim, provided however that holders of Grower Lien Claims and warehouse lien claims reserve all rights and remedies to enforce such claims to the extent that payment of such claims is not made."


In a press release on August 22, 2019, President of OPC commented on the APA, “We intend to work as quickly as possible through the forthcoming process. We are excited about bringing the growers, employees, partners and various assets of NORPAC together with our family of companies. The combined businesses will enhance the offerings and service to customers across all business channels.”

Key Terms of the APA (defined terms as defined in the APA attached to the motion):

  • Purchaser: Oregon Potato Company
  • Purchase Price: An amount equal to (i) $155.5mn, subject to withholding of the Indemnification Escrow Amount; plus (ii) the amount by which the Inventory Value is greater or less than the Target Inventory Value; plus (iii) the Accounts Receivable Collection Value (as more particularly set forth in the APA (the “Purchase Price”). The Purchase Price is now $6.0mn more than originally agreed, a change that is reflected in a "First Amendment to Asset Purchase Agreement" filed with the Debtors' motion.
  • Assets to be Acquired: Substantially all of Debtors' assets, with excluded assets including (i) cash and cash equivalents, (ii) interests in co-ops, including CoBank and (iii) a 1955 Kenworth "parade puller." Now included in the assets (it had been listed as an excluded asset in the original APA) is the Debtors' Stayton plant; presumably this is reflected in the higher Purchase Price.
  • Bid Protections: If Buyer is not the successful purchaser and an alternate transaction is approved by the Bankruptcy Court, Buyer will be entitled to receive a cash payment in the amount of $2.0mn directly from the proceeds of a sale to another purchaser (as more particularly set forth in the APA, the “Expense Reimbursement Fee”). Any competing bid must exceed the sum of the Purchase Price by $3.0mn (this reduced from $4.0mn, comprised of the Expense Reimbursement fee and an additional $2.0mn), and otherwise meet the financing and other requirements set forth below (such bid, a “Qualified Competing Bid”). If there is a Qualified Competing Bid, Sellers will hold an auction for the Purchased Assets (the “Auction”). Buyer may participate in the Auction, and any subsequent bid must exceed the previous bid by at least $250k (this reduced from $500k). In order to determine the winning bid at any such Auction, Sellers will evaluate the value to be provided to Debtors under the bids, including the net economic effect upon Debtors’ estates, taking into account Buyer’s right to the Expense Reimbursement Fee.

About the Debtors

Founded in 1924 and headquartered in Salem, Oregon, NORPAC Foods, Inc. (“NORPAC”) is the largest processor of frozen vegetables and fruits in the Pacific Northwest. NORPAC is a cooperative owned by over 140 members. Affiliate debtors Hermiston Foods, LLC (“Hermiston Foods”) and Quincy Foods, LLC (“Quincy Foods”) and together with Hermiston Foods and NORPAC, the “Debtors”) are single-member limited liability companies whose sole member is NORPAC. The Debtors own and operate raw processing plants in Brooks, Oregon, and Stayton, Oregon, a packaging plant in Salem, Oregon, and a raw processing, packaging, and roasting facility in Quincy, Washington. Each of the plants have associated cold storage facilities. Debtors also have a harvesting operation in Hermiston, Oregon. Debtors have cultivated a diverse supplier base built on a network of over 220 contract growers spanning more than 40,000 acres. Debtors’ growers are made up of family-owned and run farms focused on providing quality vegetables and fruits. Debtors have the ability to process 23 different fruits and vegetables and have established relationships with a customer base of over 1,250 buyers spanning the retail, food service, club, export, and industrial markets worldwide. 

The Debtors’ sales have exceeded $310.0mn in each of the last three fiscal years and the Debtors employ more than 1,125 full-time employees and over 1,100 seasonal employees during the harvest and processing season. Debtors are the largest unionized agricultural employer in Oregon, with approximately 2,000 union members. 

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The post NORPAC Foods, Inc. – Court Approves $155mn Sale to Oregon Potato Company After Last Minute Scramble Over Potential Liabilities appeared first on Daily Bankrupt Company Updates | Bankrupt Company News.

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