Townsends to Close by October

US - Townsends is to close down after apparently being rescued back in February this year, with the loss of more than 1,000 jobs in North Carolina and Delaware.
calendar icon 1 August 2011
clock icon 4 minute read

A Ukrainian billionaire who bought assets of the venerable Delaware poultry firm, Townsends Inc., out of bankruptcy in February has decided to retreat, closing the business and laying off more than 1,000 people, including about 40 in Delaware.

Delaware Online reports that Omtron USA, owned by billionaire Oleg Bakhmatyuk, told North Carolina officials on Friday (29 July) that it would close plants in Siler City and Mocksville, where about 1,000 people have been working. Closings are expected by October.

About 18 people who work in Townsends' corporate office in Georgetown lost their jobs on Friday. An additional 20 are winding down the business there and will also be laid off.

Townsends, a 109-year-old business, filed for bankruptcy in December, blaming its downfall on surging prices for corn, a prime ingredient in chicken feed. Years earlier, the company had sold its Delaware poultry and soybean processing facilities to Mountaire Farms and reduced its Delaware presence to a corporate headquarters in Georgetown.

At the time of its bankruptcy, just 53 of the firm's 3,500 employees were based in Delaware. The company's primary processing operations were in Arkansas and North Carolina.

Mr Bakhmatyuk bought the North Carolina and Delaware assets of Townsends for $24.9 million at a bankruptcy sale in February. Townsends sold its Arkansas operation to Peco Foods for $51.4 million. In an interview this spring, Mr Bakhmatyuk, founder and chairman of the Ukrainian egg producer Avangard, said he planned to ship dark meat to overseas markets.

David Purtle, who was hired as chief executive to run Omtron after the February purchase, said he was surprised by Mr Bakhmatyuk's decision to leave the business, according to Delaware Online. He said the company has made about $7 million in upgrades to the North Carolina facilities since the bankruptcy sale.

He said: "They just weren't real crazy about the business environment so they just decided to take their losses." Mr Purtle ran the business from his Atlanta-area home. He said he never met Mr Bakhmatyuk and dealt only with representatives.

He said they were worried about corn prices continuing to escalate and a lack of discipline in the US poultry industry. Poultry processing companies have been slow to cut production, despite the challenges. A recession battered chicken prices but costs have been soaring, putting escalating pressure on the industry.

"When you see weak markets, you need to respond with volume." said Mr Purtle, a former executive at Tyson Foods, a publicly traded meat processor. "He felt like they weren't doing that. I think the man may be right. You've got a number of companies showing big losses. It looks to me like a smart businessman would have pulled it back earlier."

The industry's retrenchment has caused turmoil this year in Sussex County.

Allen Family Foods, the Seaford-based poultry producer, also cited the surging cost of corn when it filed for bankruptcy in December, reports Delaware Online. Other companies, like the Salisbury chicken giant Perdue, are turning to higher margin products, like pre-cooked nuggets and individually wrapped breasts.

Harim USA, a division of a South Korean meat producer, bought most of Allen's assets for $48 million, plus $38 million in inventory, last week. Harim had bid on Townsends business at the bankruptcy sale in February, but was outbid by Omtron and Peco.

The Allen assets the company acquired include a plant in Harbeson, which now employs about 500 people. Some 200 to 300 people were laid off on Friday night when the plant ended night-shift operations.

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