Stout advised Country Fresh Holding Company Inc. and its affiliates (collectively “FFG,” or the “debtors”) on the successful sale of its assets. The deal, which closed in April 2021, was conducted through three separate transactions pursuant to Section 363 of the U.S. Bankruptcy Code and an ancillary Companies’ Creditors Arrangement Act (“CCAA”) proceeding in Canada.

FFG was founded as a private equity-owned roll-up of food processing businesses with a complex footprint consisting of 11 processing facilities in the U.S. and Canada. After the roll-up in 2017 of Country Fresh Foods, Sun Rich Fresh Foods, and Tiffany Gate Foods (which rebranded to the Fresh Food Group), the consolidated business faced integration challenges and competitive pressures. In addition, COVID-19 negatively impacted demand for FFG’s fresh-cut produce and foodservice segments.

Stout was retained in October 2020 to evaluate alternatives for FFG and ultimately pursued a sale transaction. In February 2021, the debtors signed an asset purchase agreement with Stellex Capital Management as the stalking horse bidder for the entirety of FFG at a price of $30 million cash plus $25 million of “take back” paper secured by the owned real estate, and simultaneously filed for Chapter 11 and CCAA protection. The stalking horse bid incorporated working capital adjustment thresholds, which were ultimately projected to decrease the amount of take back paper received by the debtors by over $10 million.

As part of the sale process, Stout’s food and consumer industry bankers, working in tandem with Stout’s special situations team, solicited interest from over 200 strategic and financial buyers to create a highly competitive auction and ultimately topped the stalking horse bid by selling the company in multiple transactions. Stout attracted separate bidders for portions of the Western and Eastern Canadian assets, with Homestyle Selections LP (a portfolio company of Tillridge Global Agribusiness Partners) bidding $30 million for the Toronto assets, and Save-On Foods LP (a subsidiary of the Jim Pattison Food Group) bidding $2.5 million for the Vancouver assets. In the U.S., Stellex outlasted Taylor Fresh Foods through several rounds of spirited bidding and prevailed at $35.5 million. The winning combined bids totaled $68 million in cash, plus the assumption of approximately $25 million of assumed liabilities, and Stout was able to reset the working capital thresholds to be more consistent with (then current) projected closing balances. As a result, the final cash proceeds represent a nearly 50% increase in net value to the debtors’ estate relative to the stalking horse bid, and the proceeds are entirely in cash.

“The Stout team was extremely effective in canvassing the market to find qualified buyers, communicating the value of the company, and strategizing throughout the marketing and auction process to maximize value for the estate,” said Bill Andersen, CEO of Country Fresh. “Their approach was collaborative, professional, and organized. In short, they were critical in driving to this favorable outcome,” added Bill.

Stout’s Mike Krakovsky, Robert von Furth, Gian Ricco, Sidarth Balaji, and Aaron Perez executed the transaction.

See more information on Stout’s services involving Special Situations & Distressed M&A and Consumer, Retail, Food and Beverage.