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CB Holdings Buys Bankrupt Davie Cigarettes Companies

Phelps is also facing a lawsuit that alleges that Phelps made a fraudulent transfer of $8.1 million in assets from the three companies and used it to help buy the six parcels of land, as well as Chinqua-Penn Plantation, two corporate jets, cigar-manufacturing equipment and a 2008 Maserati Quattroporte.

The purchase by CB Holdings will follow the bankruptcy process known as a 363 sale and requires bankruptcy court confirmation.

"We have been working on this acquisition for over a year and are excited for the positive benefits to all parties," Fuller said.

Phelps' attorney could not be reached for comment.

CB Holdings LLC has agreed to buy the assets of three bankrupt cheap cigarette online companies in Mocksville — Renegade Holdings Inc., Renegade cigarettes Co. and Alternative Brands Inc. — for $15.6 million.

Charles Fuller, the president and chief executive of CB Holdings, said the operations will remain in Davie County with no changes, except for the Renegade and Alternative Brands names.

Peter Tourtellot, the bankruptcy trustee for Renegade Holdings, Renegade discount cigarettes and Alternative Brands, said combining the companies is the best possible solution.

"It protects the jobs of our employees in Davie County and puts two companies together that will be a much stronger player in the buy cigarettes industry as opposed to individually," Tourtellot said.

CB Holdings, based in Raleigh, owns Firebird Manufacturing LLC, a manufacturing company in South Boston, Va., and Cherokee Brands LLC, a sales and distribution company recently renamed from Cherokee cheap cigarettes Co.

The purchased companies will now operate under the Firebird and Cherokee names.

Together, Renegade Holdings, Renegade buy cigarette online and Alternative Brands, which are currently owned by Calvin Phelps, have about 100 employees. These companies own the cigarettes product brands Tucson, Tracker, Murano and Hombre. Alternative Brands is also a contract manufacturer of private-label cigarettes for sale products.

With the purchase, CB Holdings will employ about 150 people. The deal is expected to close Oct. 30.

"The combined company will benefit distributors, retailers and consumers," Fuller said. "It will have a strong family of brands, will leverage economies of scale in its production facilities and will be well-positioned to meet the stringent regulatory requirements implemented by governmental agencies."

Renegade Holdings, Renegade cigarettes and Alternative Brands filed for Chapter 11 bankruptcy protection on Jan. 29, 2009, and exited bankruptcy June 1, 2010.

They were put back into bankruptcy July 19, 2010, when the reorganization plan was vacated, in part because of a criminal investigation of Phelps and the companies regarding what authorities called "unlawful trafficking of cigarettes."

Michael Lord, an associate professor of strategy and entrepreneurship at Wake Forest University, said the acquisition should not be a big risk for CB Holdings in terms of its basic operations and marketing because it already has similar businesses.

"These types of closely related deals tend to have pretty good odds," he said.

Lord said the challenges for CB Holdings could be in its financial structure and its execution.

"If they have a reasonable financial structure in place that doesn't stretch them too thin, and if they have the people to make the combination run smoothly, it could be a good deal," he said.

He said buyers tend to get pretty good prices on assets when a purchase follows the acquired companies' bankruptcies.

"Also, because these are closely related businesses in which the buyers have some deep experience, they should have been able to do a good job figuring out what the assets really were worth," Lord said.