DES MOINES, IA (DTN)--Giant farm co-op Farmland Industries, trying to emerge from bankruptcy, is looking at whether it should sell its profit-making meat business, reported the Kansas City Star newspaper.

At an Oct. 22 bankruptcy hearing in Kansas City, Farmland discussed hiring an investment banking firm to put a price tag on its lucrative beef and pork operations, and see if there are any interested buyers.

"Putting a value on those businesses is a natural part of the (bankruptcy) process. We need to do that as we file a bankruptcy (reorganization) plan," said Farmland spokeswoman Sherlyn Manson.

According to the Star newspaper, Farmland executives have said that the pork and beef businesses are the company's most valuable assets and that they don't want to sell them.

Farmland's pork business is part of the bankruptcy, says the newspaper. Its beef business, which it holds in partnership with another company, is not.

Company executives have suggested that the meat businesses could become the centerpiece of Farmland's reorganization plan. They stress that the meat plants aren't for sale yet, and that a purchase offer from Smithfield Foods was rejected earlier this year.

They even stress that last week's dismissal of Farmland meat president Bill Fielding is not a sign that they plan to sell the meat business.

In other bankruptcy moves, federal bankruptcy judge Jerry Venters approved Farmland's request to hire investment banking firm UBS Warburg to help Farmland sell its fertilizer business. The fertilizer business has been a large money-loser for Farmland in recent years, noted the Kansas City Star.

In fact, declines in the price and demand for fertilizer were contributing factors leading to the company's May 31 bankruptcy, says the newspaper.

As part of the approval, Farmland agreed that if it hired an investment banker to assess any other assets, including its meat businesses, representatives of Farmland's creditors could help interview and negotiate fees and select the firm.

Creditors wanted that input because they were unhappy with the original deal that Farmland struck with UBS Warburg, said the newspaper. Warburg proposed being the agent for the sale of any assets that Farmland decided to sell, including the meat businesses. But Warburg said it might need help--outside consultants--to sell the meat business.

When Farmland presented the proposed deal, lawyers for the creditors adamantly opposed it as too generous to Warburg. First, they said there was no need to pay Warburg monthly retainer fees to be the agent for the meat businesses if Farmland did not want to sell its meat plants.

Second, in the event that Farmland would sell the meat businesses, creditors argued that there was no need to pay Warburg huge transaction fees when Warburg might get other experts to help.

The proposal was rewritten to hire UBS Warburg only to help Farmland sell its fertilizer businesses, said the newspaper.

"At great expense, over a long period of time, we got them (Farmland) to narrow the proposal for Warburg to just sell the fertilizer business. When it comes time to evaluate another asset, we wanted a promise that it wouldn't happen like this again," said Paula Acconcia, who oversees creditor concerns as U.S. bankruptcy trustee.

Still, added Acconcia, "Farmland is going to have to evaluate those (meat) businesses and put some market value on them, at least for the purpose of the reorganization plan."

Farmland Refrigerated Foods, as Farmland's combined meat businesses are known, plus its petroleum operations, were Farmland's only profitable lines of business in fiscal 2001. The pork and beef businesses provided about $18 million in net income on $4.8 billion in net sales.

The sale of its meat businesses would be complicated because its beef processing division is part of a 50-50 partnership with U.S. Premium Beef, a member-owned beef cooperative also based in Kansas City. Members of U.S. Premium Beef raise much of the cattle that Farmland processes into meat. Farmland and U.S. Premium Beef jointly own Kansas processing plants in Dodge City and Liberal.

U.S. Premium Beef has an option to buy any or all of Farmland's interest in the beef operation, if it decides to sell.

Plus Smithfield, the country's largest pork processor, remains interested in Farmland's meat businesses, said the Star newspaper.

"We have earlier publicly expressed interest in that business, and that has not changed," said a Smithfield spokesman.

At Tuesday's hearing, Farmland also got approval to proceed with the sale of its catfish operations to Goodbody International for $1.75 million and the value of the catfish inventory, said the Star. The fish operation is based in Eudora, AR.

Meanwhile last week, in order to cut costs, Farmland terminated the president of Refrigerated Foods, saying the position was not needed. Bill Fielding had been an executive vice president of Farmland Industries and president of the meat businesses since February 2000. He came to Farmland after more than 30 years in agribusiness, working in the meat business at ConAgra Foods and Cargill, two of the country's largest food companies.

The move was amicable and was made to cut costs as Farmland reorganizes in bankruptcy court, said Bob Terry, Farmland's chief executive. Terry will now oversee Farmland Refrigerated Foods.

"We are cutting costs wherever we can," said Terry. "We are in bankruptcy...and we are trying to be as efficient as we can as we go forward. It would be a misperception for anyone to think this signals anything about the direction of our restructuring."

John Miller continues as chief executive of Farmland National Beef and George Richter continues as president of the Farmland Foods pork division, said Terry. These two companies mostly make up Farmland Refrigerated Foods.

In fiscal 2000, Fielding received $204,167 in salary and a $375,000 bonus. Fiscal 2001 produced a $350,000 salary and no bonus.

He agreed that the parting was friendly and did not involve any disagreements over operations of the businesses. "It was just a question of whether the position was needed," he told the Star.

He said he thought Farmland's food businesses had a positive future. "There are very strong people still there," Fielding said. "The business is great, the brands are great and the people are great."

Farmland filed for bankruptcy with listed assets of $2.7 billion and liabilities of $1.9 billion. Those figures included Farmland partnerships, such as its Farmland National Beef business, that are not part of the bankruptcy.

As of July 31, the Farmland businesses that are part of the bankruptcy listed assets of $1.47 billion and liabilities of $1.67 billion.

Terry has said throughout the reorganization that Farmland intends to keep the meat businesses, even as it tries to sell off many of its other assets, said the Star.

Terry himself was named chief executive in May, only two weeks before the company filed for bankruptcy reorganization.

While Farmland has yet to file a reorganization plan with the bankruptcy court, the Kansas City-based cooperative has already put its fertilizer-making operations up for sale. It has also been trying for several years to sell a petroleum refinery in Coffeyville, KS.

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