“They were very good farmers,” he said. “I don’t want to speculate what happened in this specific case, but you can’t take the soul out of an operation and expect it to thrive. An MBA can’t make the decisions that come with farming the same land for decades.”
He continued: “I’m saddened because this is happening all over the valley. For one reason or another, there has been a fundamental change in our business. Whether it is government regulations or lack of water or other issues, legacy families are leaving the business.”
In an email response to The Produce News, Dan Gerawan, who served as CEO of Prima Wawona shortly after the merger for a brief time, also commented on the Chapter 11 filing: "It wasn't a surprise since the new owners had abandoned the practices that made my family's company a success. But it was shocking to see how quickly it happened.”
Gerawan is not just a disgruntled former CEO of the company; he is a major investor in Prima Wawona and filed a shareholder derivative lawsuit suit in July on behalf of the corporation against the Paine Schwartz Partners, the corporation’s directors, officers and others. A derivative lawsuit is not personal but, in fact, belongs to the corporation. Any damage awards of the suit come to the corporation, not to the shareholder.
The lawsuit, which was filed by a company controlled by Gerawan, reveals that the former CEO, through Negocios Libertad LLC, owns about 25 percent of Prima Wawona.
“As an investor, Paine Schwartz told me that I lost everything I invested in the company. None of us investors, including the public pension funds, will get anything back. It’s all gone,” Gerawan relayed in an email to The Produce News after the initial story was published.
One of those public pension funds that invested in Paine Schwartz’s Wawona Packing Fund was the Maine Public Employee Retirement System (MainePERS). According to published reports, the pension fund made an initial $15 million investment in Paine Schwartz’s Wawona Packing fund in 2017. By September 2022, the investment was worth $7.978 million. By end of 2022, the MainePERS investment into the Wawona fund was worth only $4,000. In 2019, MainePERS invested more than $7 million in Paine Schwartz’s merger investment into Prima Wawona. With the merger, that investment rose to more than $13.3 million in September 2022. But by the end of the year, the MainePERS investment into Prima Wawona was worth less than $537,000.
Another San Joaquin Valley grower said it is hard to imagine that another company will come in and buy the assets for anything but a highly discounted price. Even then, he opined that it is more likely that the company be sold in pieces. He speculated that the farmland is valuable but large-scale stone fruit farming is not attracting a lot of interest.
While 2023 was a relatively good year, stone fruit has not generally performed as well as other San Joaquin Valley crops over the past decade. Nut crops generally have done well, and wine grapes are another crop that the investor community seems to like.
This grower believes the Prima Wawona land is being cared for on a maintenance level but not many of the orchards have been redeveloped over the past four to five years, which is an ongoing practice in the stone fruit business and could have been the reference Gerawan was making in his original email statement.
Both industry veterans who spoke to The Produce News said that California’s 2024 tree fruit volume will be materially impacted by the disposition of the Prima Wawona company and land. Such a large player will affect the supply-demand curve one way or the other.
“The Prima-Wawona Chapter 11 is a real concern in the industry,” said the grower who identified himself as a legacy stone fruit grower.
Though Prima Wawona did not respond to a press inquiry, the company’s CEO, John Boken, was quoted in the press release as saying, "Over the last several years, Prima Wawona has grown tremendously. We recently completed the 2023 harvest season, during which our team grew, packed and delivered more fruit across more acres than ever before. At the same time, the business has faced significant headwinds, including increased costs and weather-related impacts, that have combined to make our existing capital structure unsustainable. Over the course of this year, we proactively evaluated options intended to enable us to build on our leading market position, our efficient and sustainable farming practices, and our history as an employer of choice."
He continued: "We are pleased that our lenders have reached an agreement and fully support this ownership transition that charts a path forward to strengthen Prima Wawona and position the business for long-term success. The court-supervised process allows for the possibility that a qualified third-party buyer will emerge as the owner of the business as an alternative to our lenders. The entire Prima Wawona organization is focused on working through this process as quickly as possible."
