San Diego-based Bumble Bee Foods has filed for bankruptcy and agreed to sell its assets to Taiwan-based FCF Co. for $925 million, a move sparked by significant legal challenges faced by the company.
Bumble Bee, one of North America’s largest branded seafood companies, filed for Chapter 11 reorganization Thursday in Delaware to help pave the way for the proposed sale.
“It’s been a challenging time for our company but today’s actions allow us to move forward with minimal disruption to our day-to-day operations,” said Jan Tharp, president and chief executive officer for Bumble Bee, in a statement. “We have an experienced leadership team in place and plan to transform our business in bold and innovative ways that will build a legacy worthy of our proud 120-year-old history.”
Bumble Bee has been mired in legal troubles related to price-fixing. In 2017, the company pleaded guilty to conspiracy to fix the prices of tuna fish from as early as 2011 through at least as late as the end of 2013, according to the U.S. Department of Justice.
The company agreed to pay a $25 million criminal fine over five years — $17 million of which remains outstanding, according to its bankruptcy filing.
In addition, it faces three class-action lawsuits from consumers, retailers and distributors that are still pending, as well as eight separate legal claims from grocers and others.
Former Chief Executive Christopher Lischewski pleaded not guilty last year to criminal charges related to the price-fixing investigation. His trial is underway in California federal court.
Starkist also pleaded guilty to the price-fixing charges in 2018, according to Bloomberg News. Chicken of the Sea, which moved its headquarters from San Diego to El Segundo last year, cooperated with the investigation and was not charged.
About 50 years ago, tuna was San Diego’s third-largest industry, employing about 40,000 workers in catching, canning and marketing the product. Today, a vast majority of the industry is located elsewhere.
But Bumble Bee’s headquarters remained, and it is a major player in the industry with 41 percent U.S. market share for canned albacore and 13 percent of the canned “light meat” tuna market. U.S. and Canada sales totaled $933 million last year, according to bankruptcy records.
The Department of Justice fine and civil litigation resulted in Bumble Bee spending “tens of millions of dollars in defense costs,” according to bankruptcy documents. The result was an imminent default on the of its debt, which totaled $650 million at the time of the bankruptcy.
That led the company to begin exploring a sale earlier this year.
Bumble Bee said it has received $280 million in new financing commitments from its existing lenders that will provide sufficient liquidity to fund the business through the closing of the bankruptcy sale. The company intends to submit bid procedures and sale documents to the court soon.
FCF will serve as a “stalking horse” purchaser for the sale process, the company said. Its bid will be the baseline for a court-supervised auction process aimed at getting the highest offer for the company’s business.
It is unclear whether other bidders would be interested in Bumble Bee, however. FCF supplies Bumble Bee with nearly all its albacore and a substantial majority of its “light meat” tuna. It acts as a broker and contracts directly with more than 500 independent tuna fishing vessels around the world.
FCF’s bid for Bumble Bee consists of $275 million in cash, the assumption of the remaining $17 million Department of Justice fine and the rollover of up to $639 million in existing Bumble Bee debt.
Bumble Bee, which has been owned by Lion Capital since 2010, employs about 500 workers globally, including 168 workers at its corporate offices in San Diego and New Jersey, according to bankruptcy records. The bulk of its employees, about 300, work at a processing facility in Santa Fe Springs.
The company expects to continue operating its business as usual and retain nearly all of its workers.
Bumble Bee’s Canadian , Connors Bros Clover Leaf Seafoods Co., will also seek to reorganize under Canadian insolvency law, the company said in the statement.
Tharp said she anticipates that the transaction will occur over the next two to three months.
“It is our clear intent that all U.S. and Canadian operations continue uninterrupted,” said Tharp in a statement. “Employees will get paid, our customer partners can count on us to continue delivering outstanding brands and services, and vendors will be paid in the ordinary course of business.”
Bumble Bee sells seafood products under the Bumble Bee, Brunswick, Snow’s, Wild Selections, Natural Blue, Anova, Kumabachi and Beach Cliff brands.
