Chapter 11 bankruptcy proceedings for Cagle’s Inc and Cagle’s Farms that began in mid-October 2011 are likely to be settled through a court-approved bidding and auction process, according to a filing last week with the U.S. Bankruptcy Court in the Northern District of Georgia. A stalking horse purchaser is also proposed.  The purchaser is JCG Foods, an affiliate of Koch Foods. A hearing has been set for April 4 in Atlanta to establish guidelines for the auction, according to the filing.

JCG foods has offered to pay $37 million for the Cagle’s assets, with adjustments for inventory, accounts payable and receivables, and other expenses.  The agreement also states the purchase price, payable at the closing will be $55 million in cash, plus a promissory note for the balance.  As of January 28, the declared value of Cagle’s debtors’ inventory and accounts receivable was about $43 million.  Payables and accrued expenses since January 28 were about $7.7 million, which JCG Foods will assume.  A break-up fee of $1.8 million is proposed if JCG Foods is not the successful bidder.

The court is to approve the submission of competing bids by May 4 and for an auction by May 10 if competing bids are received.  Four interested parties submitted written indications of interest with the JCG Foods bid deemed as “offering the highest recovery for all stakeholders.”  Cagle’s assets include two processing plants, a feed mill, and a hatchery.  The facility in Macon, Georgia, is excluded from the sale.

The company cited high high feed prices as the cause of the bankruptcy.  Cagle’s is the third company to declare bankruptcy. Two other companies–Townsends and Allen Family Foods, both of Delaware–also field Chapter 11 since last December.