Ailing Dairy Firm Agrees to Sell Three Plants in State

Ailing Knudsen Corp., the largest dairy in the West, said late Friday that it has agreed to sell three Northern and Central California processing plants for an undisclosed amount to Le Prino Foods of Denver.

The proposed sale of factories in Hughson, Lemoore and Willows is good news for cash-strapped Knudsen and its suppliers. The Los Angeles company noted in a statement that “the proposed transaction would assure milk producers of outlets for their milk supplies in Northern California, stable employment opportunities for employees and help Knudsen resolve some of its current financial problems.”

Knudsen, which faces an involuntary bankruptcy action filed by creditors who claim they are owed more than $5 million, has placed all or part of the company up for sale. The company has also missed two $18-million payments to suppliers.

Other parts of the company are being examined by potential buyers, a company spokesman said. For example, a group of managers has offered to buy the company’s Dallas-based operation, which serves Texas, Louisiana, Arkansas, Kansas and Mississippi.

Other Facilities

The three plants employ 180 of Knudsen’s 5,000-member work force. Knudsen, a subsidiary of Winn Enterprises, has another six production and distribution facilities in California.

“This is a very positive step for the company,” a Knudsen spokesman said. “It’s a strong stabilizing move.”

The Hughson plant near Modesto produces powdered milk and butter. The Lemoore plant near Visalia makes mozzarella cheese. The Willows factory near Chico manufactures powdered milk and industrial dairy products.

Le Prino Foods is the world’s largest manufacturer of mozzarella cheese. It also produces other cheese and butterfat products. Le Prino has had a production agreement with Knudsen’s Lemoore facility for some time, Knudsen said.

While the sale does not include any guarantees that Le Prino will buy from Knudsen’s current suppliers, “it makes sense” that current arrangements would continue, the Knudsen spokesman said. The three plants account for 20% to 25% of Knudsen’s total processing capacity in California of about 9 million pounds of liquid milk a day.

The proposed sale is still in the preliminary stage. A letter of intent has been signed but the transaction must still be approved by the Winn Enterprises board of trustees, a business trust.