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Iowa Premium Pork negotiating new deal to own packing plants

by 5m Editor
1 July 2003, at 12:00am

IOWA - The IPP is moving ahead with plans to purchase Pinnacle Foods Group packing plants in Des Moines even though it failed to raise enough funds in a recent equity drive.

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Marston McGwin, IPP’s vice president of administration told the Iowa Farm Bureau (IFB) swine advisory committee last week that the company is renegotiating the purchase of Pinnacle Foods.

IPP tried to raise $26 million from pork producers in order to purchase two plants in Des Moines, one in Missouri and a trucking firm in Des Moines. Reportedly, McGwin said the group raised a lot of funds toward the purchase but failed to reach the $14 million minimum needed to do the deal. McGwin said that the operation would have been too highly leveraged had they moved ahead. He said that renegotiated terns could reduce the cost of the plants to 50% of the original price. The Missouri plant will no longer be included in a possible purchase.

McGwin said that negotiations originally started a year ago and that at that time the firm was losing money and in need of a turnaround. Today the company is in severe financial difficulty, and has closed the Missouri plant.

If IPP does reach terms with Pinnacle, the IPP members will have second chance to invest in the purchase. The initial offering earlier this spring had a $14 share cost. McGwin said that this offering would probably be at a $12 per share cost. So far producers have shown a commitment to the project totaling around 400,000 head. McGwin said that the group wants to secure 1 million head of hogs for the project. Pinnacle currently processes around 4,000 head of hogs per day.

McGwin said he feels there is a high probability that a transaction will be consummated.

Source: Iowa Premium Pork - 1st July 2003

5m Editor