Zacky Farms, the Fresno-based poultry company that filed for bankruptcy last fall, will remain in the hands of the Zacky family under the terms of a $31.6 million sale, reports The Fresno Bee.

In a bankruptcy auction last week in San Francisco, the Robert T. and Lillian D. Zacky Trust submitted the highest bid for the company. The proposed sale was announced by the company in a statement earlier this week. The Robert and Lillian Zacky Trust has provided the financing to keep the company running since the bankruptcy filing on 8 October.

A US District Bankruptcy Court judge must still approve the sale of Zacky Farms - one of the nation's largest producers of turkeys - to the trust. A hearing on the proposed sale is set for next week in Sacramento. The family-owned company not only runs its turkey processing plant in Fresno and another processing centre in Stockton, but also operates a number of its own turkey farms in the central San Joaquin Valley.

Court records report that the Zacky Trust bid amounts to $31.6 million. That includes $26 million in credit that the trust has already extended to the company, as well as an agreement to rehire "substantially all of the employees". The re-hire agreement is valued at about $5.6 million. In its initial bankruptcy documents, the company reported that it employed about 1,000 people in Fresno, Tulare, Kings, San Joaquin and Los Angeles counties.

The Zacky Trust put up about $71 million to keep Zacky Farms in operation during the bankruptcy but with a requirement that the company be sold at auction, according to The Fresno Bee.

Keith Cooper, the chief restructuring officer, said the Zacky bid will preserve the operations and jobs of Zacky Farms. "Further, this result confirms the commitment of Lillian Zacky and Scott Zacky to the continued operation and turnaround of Zacky Farms," Mr Cooper said.

But the Zacky Trust was not the only bidder. Sanger-based Pitman Family Farms offered more than $22 million in cash for the company but with no agreement to rehire the Zacky employees, according to court records. After the auction, the Pitman company offered to increase its bid.

Zacky Farms blamed rising feed prices for the financial difficulties that forced the bankruptcy filing, The Fresno Bee reports. When it filed its Chapter 11 petition, the company estimated its debts at between $50 million and $100 million, and poultry feed suppliers were among its largest creditors. The company 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.

Prior to the bankruptcy filing, two branches of the Zacky family had been negotiating to buy each other out in both the turkey farming and processing business and a sister company, Integrated Grain & Milling. The two branches of the family were unable to reach agreement on a buy-out for full control of the turkey company. Integrated Grain was not part of the bankruptcy filing.

Zacky Farms was founded by Samuel Zacky in 1928. For years, the company produced both 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 Fresno Bee report concludes that Zacky Farms re-entered the chicken business in late 2011, entering a niche market to grow free-range and antibiotic-free birds.