Massive fruit grower bankrupt in Fresno, 5,400 jobs lost. Who gets 16K acres prime farmland?

In a spectacular fall, Prima Wawona, one of the largest growers and packers of tree fruit in California, is laying off more than 5,400 workers this spring as the bankrupt Fresno County fruit company prepares to sell off 16,000 acres of prime farmland.

Longtime farmers say the demise of the mega-company and the sudden availability of that much valuable agricultural real estate is unprecedented. The shuttering of the business is a blow to the migrant worker community, with 7 of every 10 employees at the company a seasonal farm worker.

“This is a big deal,” said James R. Maxwell, founder of Agriland, a Madera-based diversified farming company.

The current company - a merger of Gerawan Farming and Wawona Packing - operated packing houses in Reedley and Cutler, employing hundreds of workers and shipping millions of cartons of peaches, plums and nectarines across the United States and around the world.

Its future looked bullish, especially with the investment of private equity firm Paine Schwartz Partners. The investment firm with offices in New York and San Mateo took over Wawona Packing in 2017. Two years later, they oversaw the merger of Gerawan Farming and Wawona Packing - two family run companies with a combined history of 150 years in the Valley.

Industry insiders estimated the value of the newly merged company at about $1 billion.

But nearly four years later, Prima Wawona, managed by its new owners, filed for Chapter 11 bankruptcy on Oct. 13, 2023, saddled with more than $600 million in debt.

The reasons for the collapse, according to court documents, include mismanagement, a lack of understanding of the volatile tree fruit industry, and the use of high-priced consultants that were “either performing poorly or doing nothing at all.”

Court documents show that the initial plan was to restructure the company and seek a new buyer, but none of the seven potential suitors met the $275 million minimum bid.

By early December, lawyers representing the lenders began pushing for liquidation. In federal bankruptcy court in Delaware, a lawyer for Metropolitan Life, the single largest creditor, told the judge, “Your Honor, you know, we went through an auction process and fortunately nobody hit the bid. That has forced us to conclude that the liquidation value of the company exceeds its going concern value, so we are going to do what we have to do, which is to liquidate the business.“

To prepare for what appears to be the inevitable, John Boken, Prima’s chief executive officer, sent a letter to its workforce on Jan. 12 that their employment with the company would end by March 12.

The letter also served as notice under the Worker Adjustment and Retraining Notification, or WARN, Act, which under federal and state law requires companies to provide at least 60 days advance notice of mass layoffs.

A company document of regular full time positions shows there are 5,411 employees. Of those, 3,743 are seasonal employees.

Dan Gerawan, the former CEO of Gerawan Farming and Prima Wawona, spoke briefly about the upcoming sale of the farm’s property. Gerawan, the third generation owner of Gerawan Farming, has a pending lawsuit against Paine Schwartz Partners.

“The liquidation of Prima Wawona is a sad day for the generations of men and women who worked tirelessly to build and tend to these orchards over the last half-century,” he said.

A spokesman for the United Farm Workers Union also expressed his concern for the workers. The union and Gerawan battled for several years over the right to represent the workers.

“These workers were failed,” said Antonio De Loera-Brust, union spokesman. “Our hearts go out to the thousands of workers who are affected by this.”

Brent Smittcamp, the former president of Wawona Packing, could not be reached for comment. Wawona Frozen Foods in Clovis is a separate company and not a part of the bankruptcy.

Reedley City Manager Nicole Zieba does not expect a sustained spike in unemployment like what occurred in 2011 when several major packing houses shut down, triggering a 33% unemployment rate. This time around the workforce appears to be spread throughout two counties, Fresno and Tulare, and there are jobs available.

She also does not believe Prima Wawona’s closure is a harbinger of what’s to come. Communities including Reedley, Dinuba, and Kingsburg make up the heart of the state’s tree fruit industry.

“I think when an investment company takes over it can be hard for them to understand what it’s like to walk the land,” she said. “I am an L.A. girl born and raised, and I had to learn a lot about farming. There is an art and passion that goes into farming that is not quickly learned by folks who are simply looking at financial statements.”

Still unresolved is who will end up with the more than 16,466 acres of farmland. valued at an estimated $370 million.

Pearson Realty in Fresno has been tapped to offer the properties that are divided into seven land groups, based on location, soil, water profile, and pricing. The properties are mostly in east Fresno County but some are also in the Kerman area.

Dan Kevorkian, a senior vice president for the company’s Ag Division, said interest has been extremely high. Within the past three weeks, Kevorkian and his associates have received more than 40 offers on various parcels of land.

“This is once-in-a-life-time deal,” Kevorkian said.

Until the bankruptcy process is over, however, and the lenders obtain ownership of the company, all land sales are pending.

Increasing the demand for some of the land is its connection to a reliable water supply. Several of the properties are serviced by the Fresno Irrigation District, Alta Irrigation District and Consolidated Irrigation District.

Maxwell, who is also a Madera farmer, said more than likely the property will be purchased by farmers who are already in the tree fruit industry. The challenge to farmers, Maxwell said, is if you buy the property and plant something else, what do you grow? He said prices for some of the region’s stalwart crops, including almonds and pistachios, are soft.

He added that it takes a special kind of grower to farm tree fruit.

“When you farm nuts, grapes and citrus they can be more forgiving because they have a longer shelf life,” Maxwell said. “But with stone fruit it is the exact opposite. You could walk into your orchard at 6 a.m. and things look like they are coming along fine and then you get a call at noon from your guy in the field who says the crop has to be picked now.”