The financially strapped Niman Ranch has found the liquidity it needed to stay afloat. The California-based natural-meat supplier has been purchased by its largest shareholder, Natural Food Holdings, Chicago. Earlier in the month, Niman Chief Executive Officer Jeff Swain, told stockholders that company would not have the liquidity to continue operation beyond the end of January without this purchase.
Prior to this move, Natural Food held 54 percent of Niman shares. Natural Food already owns 100 percent of Sioux-Preme Packing, which processes all of Niman's pork products.
According to newspaper reports prior to the sale, Niman is going for about $22 million, inclusive of debt, which is significantly less than the company was valued at when Natural Food first invested in July 2006. This is not the first influx of cash that Natural Food (who's parent company is Hilco Equity Partners). There have been four other occasions, as Swain outlined in a stockholder letter.
Swain's letter also points out that despite a top-tier brand, Niman Ranch has never been profitable. The company expected to draw a profit last year until rising commodity prices drove up operating costs and the U.S. recession cut consumer spending, particularly for premium products.
Niman has been squeezed between having to pay ranchers and producers raising its beef and pork more to cover high commodity costs and disappointing sales on the beef side, specifically for cuts like steaks. Niman pays producer growers a premium for special feeding and animal-handling protocols to ensure that its brand claims of beef, pork, lamb and chicken products. Those claims include that the products are all-natural; that the animals receive no antibiotics or hormones, are feed an all-vegetarian diet and are reared in accordance with "humane and sustainable" practices.
According to Swain's letter, which describes the merger transaction as "a disappointing final outcome," Niman Ranch was in default on certain loans and it owed key vendors money.
Natural Food officials have reiterated their commitment to continue Niman's model of supporting small, family farmers and will continue to use the Niman
"Customers will be able to buy with greater confidence from a financially secure supplier," Swain said in a statement. He contends that merger puts Niman Ranch in strongest financial position it has ever been in, and will allow it to grow and expand its operations. However, Niman's production operations and the company's workforce has been shrinking.