Last updated on 2014.06.08
(In today's Freudian slip, I first type White Oaf.)
White Oak Global Advisors from San Francisco announced yesterday that it finalized its acquisition of Northern Beef Packers in Aberdeen. White Oak's press release (text below, as prepared by Sioux Falls ad firm Fresh Produce) is more about saying nothing than explaining anything. The previously publicized purchase price is $44.3 million, but White Oak is really spending only $4.8 million in cash; the remainder is White Oak cashing in chips it previously put on NBP's table to keep the state-backed money-mashing machine creaking along into its bankruptcy last summer.
Remember, Northern Beef Packers made $80 million in EB-5 investment and $152 million in total investment capital disappear in its five years of construction and nine months of abortive operation. White Oak—or, more accurately, the newest shell corporation to be tangled into Northern Beef Packers, New Angus LLC, which as of this morning does not appear in South Dakota's corporate database—is acquiring this asset for a bit more than three cents on the dollar in new money.
David Montgomery reports that White Oak/New Angus may have trouble recouping even that meager investment:
Cattle industry expert Steve Kay, publisher of Cattle Buyers Weekly, was doubtful. With the U.S. cattle market declining and a half-dozen competing meat-packing plants already open in the region, Kay said there’s not room for another packer.
“It’s tough for me to see that White Oak’s new operators can possibly compete against six other packers, all competing for the same shrinking supply of cattle in the region,” Kay said. “The new owners, I don’t know how well they know how the beef industry actually works. I wish them the very best, but they will need more than luck” [David Montgomery, "Investment Firm Completes Purchase of Beef Plant," that Sioux Falls paper, 2014.04.01].
Here's the White Oak press release, which is all board-room bluster and the obligatory "move forward" but mostly a pointedly explicit refusal to say anything specific:
New ownership for Northern Beef Packers presents new opportunity
Sioux Falls, SD – White Oak Global Advisors, LLC (“White Oak”) is pleased to announce the purchase of the operating assets of Northern Beef Packers Limited Partnership (“Northern Beef Packers”). The beef packing plant and associated assets (the “Facility”) were purchased free and clear of past liabilities and obligations by New Angus, LLC, a new entity established by White Oak.
The purchase removes the Facility from the Chapter 11 bankruptcy proceeding of Northern Beef Packers, providing the plant an opportunity to move forward unimpeded by its previous financial obstacles.
White Oak is currently evaluating its strategic options and remains confident in the Facility’s future as an operating plant. The Facility has the potential to be a success for both the community and its stakeholders. White Oak views the purchase as an investment in both South Dakota and its surrounding
communities.White Oak will not be available for comment at this time, but looks forward to providing additional information as time and circumstance allow [White Oak Global Advisors, press release, 2014.04.01].
If that new name, New Angus LLC, means they'll be an Angus-only operation, I'd say they won't even get out of the gate. NBP, which presumably was an all- and mixed-breed processor, couldn't come close to finding the numbers of cattle that its touts projected in their flawed business plan. Narrowing down the operation to a one-breed-only product probably makes finding adequate cattle supplies even more difficult. No surprise that White Oak "will not be available for comment at this time." Meantime, I'd love to hear former Governor Rounds' opinion on the plant's prospects, along with Governor Daugaard's.
Good point John, unless the name is just an attempt to cash in on all the branding and marketing done by other companies with the name "Angus". Once you cut the hide off it's all beef, but the American consumer falls for it and I'd be willing to bet many don't even know what Angus is. Probably might think it's named after that famous cattleman, Angus McScotchman.
The big 4 will make it hard for the new guy to get traction. They'll lock up whatever cattle in the area they don't already control with feeder contracts. This is just another example of what happens when government tries to meddle in the free market system. There are reasons why NBP couldn't get private funding.
So of the $4.8 million cash settlement - I wonder how much of that will be paid to the unpaid local vendors and NBP employees?
Angus McScotchman, lol Nick. Maybe White Oak is doing a pump-and-dump by hyping it to another generation of investors. If so, they too will be singing "the bag-holder blues."
Most of the cattle in the region probably are Angus, part Angus, or at least could see into a pasture where there were Angus. Close enough for marketing!
South Dakota has an Aberdeen. There used to be cattle called Aberdeen Angus. White Oak/New Angus is located in South Dakota.
The new company I am sure is not going it alone. I think they will look for a partner to come in and buy the cattle and operate it for them. They will have to finish the plant in regards to fixing what the CEO Palmer messed up in regards to a new refrigeration system to replace the current freon system,new carcass trolley rails to replace the galvanised rails that are already flaking,change the boning room so it can bone cattle correctly and faster than a snails pace and put a rendering company in to realize the margin off the drop and not haul it to Huron each day. Just a measly $23 million or so will do this. Unfortunately Palmer and his infinite wisdom learned nothing from the mistakes made forty years ago and thought he would be able to do what men far better than he was failed at work. All that wasted money, what a shame. All those mistakes and the idiot that made them gets a paycheck and walks away, not a scratch. I guess the Koreans got what the deserved in the end. Incompetence breeds like rats, that was well displayed during the Song and Palmer show the past few years. The new company with a knowledgeable partner could do well. Slaughtering all breeds and cows with fat cattle will be key. Freight will benefit the new guys due to freight will still be less for them than the competitor's. It will be a long hard road but if managed right, some luck, and it could make it, well ok. A lot of luck!!
"evaluating its strategic options", "remains confident", "potential to be a success"
Straight from Buzzwords R Us!
I've told many urban friends to ignore the Black Angus label because the only thing it means is "Ha! Now we will charge you more!"
Black Angus is any domestic cattle with "some" Angus blood. How much exactly? "Some." I looked it up several moons ago.
Thats not quite true in regards to the Angus part Deb. Certified angus programs have validated specifications that have to be met in regards to product specifications. Non certified Angus programs, just regular comoany angus programs are pretty loose. If you see the word "certified" on the label it is a regulated program. If you see a company name and no certified on the label as for example "Goofys Angus Steaks", then beware. That is a company program that more or less says the animal was 51 percent black and hopefully had beef like characteristics. In all actuality, black, red, pink, or poke a dot as long as it is good and fat, fed good corn and feed ration, it will be good meat. Black angus is highly over rated and is just a marketing gimmick to make you pay more.
Here's the question of the day:
How much welfare money (taxpayer dollars) will Daugaard give this new company? He'll likely wait until after the election, right?
Background checks on each and every White Oak's owners and investors are in order, as well as any and all of their subsidiaries.
whats going on with this
Good question, Al! In August, White Oak trotted out its new management team of beef pros Robert "Doug" Cooper, Jim Mitchell, and Keith DeHaan (mentioned on this blog immediately after NBP's collapse into bankruptcy in July 2013 as a possible player in resurrecting NBP) to talk up the plant. CEO Cooper says the plant could start processing 1,000 head a day and employ 600 people next year.