FRESNO — The fate of poultry processor Zacky Farms is back up in the air after a Zacky family trust backed out of its bid to buy the troubled company in a bankruptcy auction.
Pitman Family Farms in Sanger appears poised to take over Zacky which could signal big changes for one of the nation's largest turkey producers. Those changes could include how the birds are raised and processed and how many workers are needed to do the job.
In court records filed Jan. 24 with the U.S. District Bankruptcy Court in Sacramento, attorneys for the company reported that the Robert D. and Lillian D. Zacky Trust "decided it would not go forward with the sale at the present time."
With its bid of $31.6 million, the Zacky Trust was deemed the winning bidder for the company at a bankruptcy auction in San Francisco.
The Zacky Trust bid included provisions that nearly all of Zacky Farms' 1,000 or more employees would keep their jobs, and would have kept the company in the hands of its founder's descendants.
Zacky Farms is now turning its attention to Pitman Family Farms.
Pitman originally bid more than $22 million at the bankruptcy auction, and after the auction increased its offer to $32.1 million, according to court documents.
Attorneys for Zacky Farms reported that "the Zacky Trust's unwillingness to go forward and close the sale requires the debtor to proceed with the Pitman backup bid."
The company accepted the Pitman bid Jan. 23, court documents state.
The Zacky Trust has provided up to $71 million in financing to keep the company operating through the bankruptcy until it could be sold.
A court hearing to finalize the sale of the company had been set for Jan. 28, but Pitman Family Farms requested until Feb. 15 to close the purchase.
Court records indicate the Zacky Trust would be required to continue to finance the company's operation until the sale is confirmed.
Pitman Family Farms produces and sells chickens, turkeys, ducks and geese under the Mary's Free Range brand.
The company is known for its free-range and organic poultry and supplies birds to the Whole Foods Market chain.
In 2010, the company became the first major poultry producer in California to begin using a more humane method of knocking chickens out with gas rather than a jolt of electricity before slaughter.
If the Pitman purchase is approved by the bankruptcy court, it would include virtually all Zacky Farms assets, including turkey processing plants in Fresno and Stockton, corporate offices in Fresno, two Fresno warehouses, a turkey hatchery in Kerman, and 16 company-owned ranches in Fresno and Kings counties.
David Pitman, of Pitman Family Farms, said he was limited on what he could say about the sale including whether all of Zacky Farms' 1,000-plus employees in Fresno, Tulare, Kings, San Joaquin and Los Angeles counties would get to keep their jobs.
"What I can say is that for the immediate future there are many birds to be processed, so a vast majority of the employees will be retained," Pitman said. "But we need to turn this company around and that will take a lot of work."
Pitman is a top niche brand among consumers, and David Pitman said the purchase of Zacky will help the company increase its market share.
"We have great support from our customers, and these facilities and farms give us the ability to grow," he said.
The Pitmans' line of poultry is organic, not given antibiotics and is free range. And they intend to raise the Zacky birds in a similar way. "There will be many changes in production," Pitman said.
Started in 1928
Zacky Farms was founded by Samuel Zacky in 1928. For years, the company produced turkeys and chickens before selling its chicken business to Foster Farms in Livingston in 2001.
Zacky Farms not only sells whole turkeys and turkey parts, but also processes and sells ground turkey and cooked turkey deli products.
The company reported gross sales of about $142 million in 2010 and $146 million in 2011.
The company re-entered the chicken business in late 2011, entering a niche market to grow free-range and antibiotic-free birds.
When Zacky Farms filed its bankruptcy petition in October, it estimated its debts at $50 million to $100 million, and poultry feed suppliers were among its largest creditors.
In court records, the company blamed rising feed prices for its financial pinch and estimated that it spent about $1.8 million a week to feed about 2.5 million turkeys and chickens as the 2012 holiday season approached.
It's unclear how much, if anything, will be paid to Zacky's unsecured creditors.