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Note: This story, directly available from http://www.dmregister.com/business/stories/c4789010/21466470.html (as of March 29, 2006), is copyright by the Des Moines Register, and is reproduced here as a matter of "fair use" for non-commercial, educational purposes only. Any other use may require the prior approval of the Des Moines Register.]

The Iowa Farm Bureau Federation and other investors have made an offer for Rudi's Bakery of Boulder, Colo.

Rudi's has received $7.9 million from Iowa taxpayers through the Iowa Agricultural Finance Corp. In exchange for that investment, Rudi's agreed to open a bakery in North Liberty, employ 104 Iowans at above-average wages, and partner with Iowa farmers by buying their crops and giving them a stake in the company.

But the Iowa bakery closed last year, six months after it opened, and no partnerships were formed with Iowa farmers. Most of the plant's baking equipment has been shipped to Rudi's operations in Colorado.

Since the closing, Rudi's has continued to collect public and private money from Iowa investors - including the Farm Bureau and a group of investors known as tecTerra - who want to protect their previous investment in the company by helping it succeed.

On May 1, the Farm Bureau's David Sengpiel sent Rudi's creditors a letter outlining plans by the bureau and tecTerra to buy the assets and some of the liabilities of Rudi's Bakery and create a new corporation called Rudi's Organic Bakery.

According to Sengpiel's letter, the Farm Bureau is committing up to $4 million in equity financing that would help the new company meet its cash demands. The new company, according to Sengpiel's letter, will keep its headquarters in Colorado "with employees continuing to work in the current location in Boulder."

The new company was incorporated in Colorado two weeks ago, with Iowa Farm Bureau officials listed as contacts and managers.

Sengpiel's letter doesn't mention the abandoned North Liberty bakery or the possibility of jobs returning there. It does say that the Farm Bureau looks forward to working with Rudi's "as it grows and prospers in the Boulder community."

Iowa Farm Bureau officials did not respond to several requests for an interview. Tom Steen, who manages tecTerra's investments, also declined to comment. Rudi's CEO, Mark Retzloff, was out of the country and could not be reached, a company spokesman said.

Dan Winegarden, executive director of the Iowa Agricultural Finance Corp., said the sale of Rudi's would help the continuing effort to put the North Liberty plant to use.

"In its first year, it was underutilized, but the North Liberty plant will generate jobs and opportunities in the future," he said. "It will yield substantially more public benefits than the empty field that was there before."

The Iowa Agricultural Finance Corp. is a private company created by the Legislature in 1998 to receive a $25 million no-interest loan from the state. The state directed IAFC to invest in companies that could produce benefits for Iowa and its farmers, then repay the state using the return on those investments.

Winegarden said the deal with the Farm Bureau would preserve IAFC's ability to recoup or better its investment. He said the sort of venture capital investing in Rudi's requires patience.

"We are only in year four of a 10-year fund," he said. "The investments made in Rudi's may yet prove out, albeit slower than originally intended."

Winegarden acknowledged that "there's still work to do on maximizing public benefits" generated by Rudi's, but he said the bakery must first succeed financially.

"In any single investment, financial performance must come before public benefit returns can be fully realized," he said. "Farm Bureau's investment allows Rudi's to get to positive financial margins. Rudi's finally has the remarkable sales growth rate that we sought from the start."

In addition to Rudi's, two Iowa companies have received money from IAFC and are providing public benefits to Iowa. A fourth company, ProdiGene, has run into problems.

ProdiGene, a biotech firm based in Texas, has received $4.2 million through IAFC but has never had a presence in Iowa. ProdiGene had promised to grow corn in Iowa, but regulatory violations derailed that effort.