Allen Family Foods, major Eastern Shore employer, files for bankruptcy

Allen Family Foods, a major employer on the Eastern Shore, has filed for bankruptcy and announced plans to sell most of its assets to competitor Mountaire Farms.

The 92-year-old Harbeson, Del.-based company filed for Chapter 11 reorganization bankruptcy on Friday in the U.S. Bankruptcy Court for the District of Delaware. Allen Family Foods listed $50 million to $100 million in debts and a like amount in assets.

The company is the third largest employer in Talbot County. It owns a poultry processing plant in Cordova that employs approximately 550 people.

Allen Family Foods cited economic conditions for causing a situation where the company’s revenues and efforts to curtail costs were not enough to keep it afloat. In one example, the company said a $1 increase in the cost of corn raised its expenses by $10 million.

“Both during and following the economic downturn, the cost of corn and other feed ingredients has risen to record levels, and the combination of unsustainable ingredient costs and reduced finished poultry prices has directly led to the company’s financial woes,” the company wrote in court documents.

In its bankruptcy filing, Allen Family Foods said that had received a letter of interest from Seaford Milling Co., a subsidiary of Millsboro, Del.-based Mountaire, to buy most of its assets for $30 million. Mountaire is also Allen’s largest unsecured creditor. According to court documents, Allen owes Mountaire $588,148.

Allen Family Foods contacted 22 companies initially to gauge interest in buying the company’s assets. Of those, only three submitted initial bids, according to the filing.

Officials from Mountaire and Allen Family Foods did not return calls for comment on Monday.

While Mountaire has submitted a letter of intent, the deal needs court approval, and an auction will be held for the assets and a larger bidder could emerge.

Also, under the agreement, Mountaire is not required to keep on all or a specified number of Allen Family Foods employees. Allen Family Foods is not planning to sell include 24 “growout” farms, where hatchlings are raised prior to slaughter and 3,437 acres of farmland.

The bankruptcy filing comes almost a year after Allen Family Foods was hit with the largest safety violation fine in Maryland history — a total of $1.03 million for 51 violations at its facility in Hurlock, in Dorchester County. Department of Labor, Licensing and Regulation Secretary Alexander M. Sanchez said at the time was an “unprecedented” penalty.

The state agency said the company had been a “source of repeated health and safety violations over a number of years.”

Until last June, Allen Family Foods was the largest employer in Dorchester County with close to 1,000 employees. At the time the fine was announced, Allen Family Foods announced it had reached a deal with Amick Farms LLC, based in Batesburg-Leesville, S.C., to buy the Hurlock processing plant as well as a hatchery and a feed mill in Delmar, Del.