Color Spot Auction Results in Successful Bids With Sales Pending
On Friday, July 20, a public auction to sell the assets of Color Spot Nurseries resulted in a successful bid for the largest greenhouse operation in the country. At a hearing on the same day, the U.S. Bankruptcy Court indicated that it would approve the sale, a source close to the deal told Greenhouse Grower on July 23. The sale is to Wells Fargo, which has partnered with TreeSap Farms, an affiliate of TreeTown USA, to acquire substantially all of the assets.
Bankrupt Company News also reported on July 23 that Color Spot Nurseries filed a notice with the U.S. Bankruptcy Court detailing the results of its July 18-20 asset sale auction, and designating the auction’s “successful bidder” and “back-up bidders” for Docket No. 238.
The notice states, “The Debtors have designated Wells Fargo Bank as the Successful Bidder with a Successful Bid of approximately $74 million of cash and credit bid consideration for substantially all of the Debtors’ assets, but excluding $9 million of working capital, as set forth in the asset purchase agreement between the Successful Bidder and the Debtors.”
Bankrupt Company News reports that on July 25, the Court will hold a hearing to consider entry of a Sale Order approving, among other things, the designations of the Successful Bidder and Back-Up Bidders. The notices also references three “Back-up Bidders” – Capital Farm Credit, FLCA, with a bid of $20,670,024.89 for selected assets, TreeSap Farms with a bid of $10 million for selected assets, and Deere & Company with a bid of $258,197.37 for selected assets. Further records state, “The Successful Bidder has agreed to designate TreeSap Farms or an affiliate thereof as the Designated Purchaser for certain personal property of Hines Growers.”
A sale hearing is scheduled by the Court for August 1, 2018, with objections due by July 30, 2018.
According to its website, Tree Town USA has a coast-to-coast footprint consisting of more than 4,000 acres in production, encompassing 16 farm locations throughout California, Texas, and Florida. Its inventory mix includes trees, shrubs, perennials, palms, grasses, succulents, tropicals, fruit, and many other items. In September 2017, Tree Town USA substantially added to its market share when it acquired Village Nurseries as its new West Coast division. With more than 900 acres of production throughout Northern and Southern California, Village Nurseries is a leading supplier of wholesale ornamental plant materials to landscape professionals and retailers throughout the Southwest.
In coordination with Wells Fargo’s acquisition of Color Spot, TreeTown USA is acquiring Color Spot’s Hines division, which has three facilities totaling more than 2,000 acres in California and Oregon.
The full deal represents the company’s latest strategic nursery acquisition and provides TreeTown USA with a foothold in the Pacific Northwest and adjacent markets as it expands its current coast-to-coast footprint.
With its foray into the Pacific Northwest, TreeTown USA’s operations will include 19 farm locations throughout California, Texas, Florida, and Oregon encompassing more than 6,000 acres in production.
Color Spot Holdings is No. 1 on Greenhouse Grower’s 2018 Top 100 list. The operation, totaling 21 million square feet of environmentally controlled space, 204 acres of shade house production, and 2,703 acres of outdoor production, serves more than 2,000 retail and commercial customers, specializing in the production and distribution of bedding plants, vegetables, herbs, shrubs, blooming potted plants, groundcovers, woody ornamentals, and more. Color Spot operates 16 production facilities in California, Arizona, Oregon, and Texas, and ships to 26 states.
The operation also provides in-store merchandising, displays, planning, and reordering services to customers including The Home Depot, Lowe’s, Walmart, Kmart, Rite-Aid, Kroger, and Orchard Supply.
Color Spot filed for Chapter 11 in a Delaware bankruptcy court on May 29. After years of bad weather and sales losses, the company needed to make a quick all-assets sale to deal with $147 million in debts, including $83 million due in the first week of June, according to a report on Law360.com.
In the declaration, Color Spot CEO Paul Russo said the company has been experiencing declining revenues since 2014 due to water restrictions, severe weather in 2015 and 2017, and losses of certain markets with key customers.
During the past year, the company tried to deal with its financial problems by closing four of its 13 nurseries, laying off 30% of its workforce, and attempting to sell its Texas-based southwestern division.
A quick asset sale was necessary, Russo said, because summer typically brings a decline in sales and operating revenue, and August through September are a capital-intensive period of preparing for the holiday season. In addition, August is the time the company’s customers begin planning their purchases for next spring.
“A sale on the timeline the debtors are proposing will provide the assurances customers will expect when placing their orders with Color Spot in that period,” Russo told Law360.com.
Keep checking GreenhouseGrower.com for updates on the sale, and what it means for the company and its assets, and for the industry.