Allen Family Foods, Inc. of Seaford, Delaware, filed for Chapter 11 in U.S. Bankruptcy Court in Wilmington on Thursday, and the company has entered into an asset purchase agreement with Seaford Milling Company, an affiliate of Mountaire Farms of Delaware.

Mountaire Farms will expand the processing facilities of its new affiliate, Seaford Milling, in Selbyville and Millsboro, Delaware, and the company said the expansion will increase the need for area poultry growers to support an additional 400,000 birds per week.

Under that agreement, Seaford Milling Company would acquire all of Allen’s assets with the exception of its corporate-owned growout farms and related farmland.  Those operations would continue to be owned by Allen Family Foods.

Included in the purchase agreement are a breeder operation in Liberty, North Carolina; processing plants in Cordova and Harbeson, Delaware; hatcheries is Dagsboro, Delaware, and Seaford, Delaware; as well as a feed mill in Seaford, according to Keith Cooper, Allen’s chief restructuring officer.

The purchase agreement is subject to a court-supervised auction process to ensure the highest and best possible price is achieved.  Competing bids will be solicted over the next 30 to 45 days, with an auction immediately following the yet-to-be-determined bid deadline.  A court hearing will then be held to approve the result of the auction.  To ensure ongoing operations during the Chapter 11 proceeding, Allen’s has secured debtor-in-possession financing, which will provide sufficient capital and allow for the payment of all goods and services, including payroll and grower payments.

Allen Family Foods, a four generation poultry company that has been in operations for more than 92 years, said the company has incurred “signification operating losses” as the industry suffered severe stress in recent years from record corn and soybean prices and “sagging chicken prices caused by an oversupply of broilers,” according to a company statement.