File photo.

In a compromise settlement between the lender companies in the Zacky Farms bankruptcy, California’s largest poultry producer, Foster Farms, has won the bidding to acquire 19 former Zacky Farms ranches in the Central Valley. If consummated, Foster Farms would elbow rival Pitman Family Farms out of the picture.

The news comes after a year-long bankruptcy hearing process saw one of the lending companies threatening to appeal if there was no compromise over the disposition of some of the Zacky assets in the bankruptcy filing launched last November.

Prior to this surprise development in the case – one of the finance lenders, Great Rock Capital had told the court if its deal was approved, they planned to lease the vacant ranches to Sanger-based Pitman Family Farms.

Now competitor Foster Farms will pay $31 million for the 19 properties, according to a September 27 court filing in Los Angeles. Key to the deal was a settlement featuring a higher bid allowing the junior lender Gem Cap to get some of the money it was owed as well as Great Rock.

“From the start, Foster Farms has steadily grown through strategic purchases of highly desired land, poultry ranches and facilities in the West Coast and beyond,” said Ira Brill, Foster Farms’ vice president of communications in a statement sent to the Business Journal.

Properties to be sold include ranches in Corcoran, Riverdale, three near Lemoore, Caruthers, four properties in Kerman and properties in Fresno, Helendale and Apple Valley.

The compromise deal does not affect earlier sales of urban properties in the Zacky portfolio in Fresno and elsewhere to OK Produce and Fresno Interstate Business Park.

Most of the ranches are in Fresno and Kings counties. One of the largest is near Corcoran, a 400-acre spread with nearly a million square feet of buildings.

Before the current compromise deal, the court said that Great Rock’s credit bid of $21,550,000 for the 19 properties was the highest and best offer. But the Great Rock sale still had not closed. Then on July 16, the other big lender, GemCap, filed a motion seeking to alter or amend the 19-properties sale order, saying in the event that if the Court denies their requested relief that GemCap intended to appeal.

But a settlement now approved by the court upped the bid by nearly $10 million to $31 million for the parties to divide up — $9.45 million more to be exact.

Zacky Farms declared bankruptcy in November 2018, the final end to a family-owned, 100-year turkey-farming business. Ironically, Pitman tried to buy Zacky Farms during its last bankruptcy filing in 2013.

Now poultry companies vie to divide the carcass.

Court papers do not yet indicate a final closing date for the sale of the properties that could still be modified. We won’t know the final details until the dust clears.

Livingston-based Foster Farms is already a $3 billion company and the West’s largest poultry producer and now looks to grow its ranches to complement a processing expansion.

Privately-owned Foster Farms just recently hired a new CEO this year and announced this spring a major expansion in Merced County boosted by a $6.5 million state and local incentive package.

Foster Farms was founded in 1939 by Max and Verda Foster. It owns farms in California and Louisiana and also works with 30 family-owned farms in Washington and Oregon.

Earlier this year there was speculation about Tyson Foods buying Foster Farms for about $2 billion according to reporting from CNBC.

Also new this summer, Foster Farms said it was getting into the free-range chicken business, allowing some flocks to have access to the outdoors at their ranches. The move follows the practice by Pitman Family Farms to offer a line of free-range chicken in the past few years, vowing to continue what is considered the more humane practice at new ranches in Kings and Tulare counties.

Foster Farms a few years ago built a new $16 million organic feed mill in Traver. They also added to the conventional feed mill already there in order to supply the new ranches they will get as a result of the Zacky deal.

The company is now the West’s largest producer of organic chicken as consumer demand for antibiotic-free meat grows. In past years, the poultry producer has been stung by recalls due to salmonella and criticism of its use of antibiotics to raise poultry.

Construction of the new mill highlights the need to separate both feed and chickens using organic principles from storage of conventional feed and chicken ranches where pesticides and fertilizers are used in the growing process.

Building this new mill in the south Valley means the big poultry company can expand its organic chicken ranches nearby. Foster Farms raises organic chicken in Merced currently.