A Dutch firm's attempted buyout of a multistate co-op has provoked a domestic group to top the Europeans' offer and instigated creation of a renegade stockholders' group.
AgStar Financial Services of Minnesota bid $650 million in August for Omaha, Neb.-based Farm Credit Services of America, a $50 million jump above what Dutch banking company Rabobank previously offered.
FCS, a farmer-owned co-op with roughly 51,000 members, loans money to Iowa, Nebraska, South Dakota and Wyoming farmers. AgStar, a co-op lender based in Mankato, Minn., does business in Minnesota and part of Wisconsin.
Mulling it over
Last week's meeting between the AgStar and FCS boards of directors prompted no action, and no follow-up meetings have been scheduled, says AgStar CFO Rod Hebrink.
"We know FCS Americaâ€™s board is in the process of evaluating our offer," Hebrink says. "We are looking forward to hearing from them as to future steps we should take."
Rabobank's $600 million offer would be a one-time cash payment, a proposal Hebrink views as inferior to his organization's offer.
"When FCS sells their organization they will no longer have any future interest in the organization as far as an ownership position is concerned," he says. "In comparison, AgStarâ€™s offer is $650 million up-front cash and FCSâ€™s stockholders continue to retain ownership and control of that organization.
"As we have heard from those stockholders, that is a very important feature. So there is the value, there is the on-going ownership and control."
The AgStar proposal also would permit FCS to continue as a Farm Credit System organization, according to Hebrink, and include the products, services and protections the system provides.
Global banking prowess
During negotiations with FCS, Rabobank has touted its international banking experience, an element Hebrink finds unimpressive in this particular situation.
"Generally what weâ€™ve heard from stockholders in both AgStarâ€™s geographic area and Farm Credit Services of Americaâ€™s area is they are far more concerned about financing their own farming operations within Iowa, Nebraska, South Dakota and Wyoming," he says. "Being in a position to purchase the farm next door or in the neighborhood means more to the borrowers than financing operations in Brazil or Mexico or elsewhere in the world.
"I suppose there are a few who see that as a future benefit to them, and perhaps they could use such expertise. But we donâ€™t see this feature of Rabobank having a significant appeal to the broad base of clients and stockholders in FCS America."
Meanwhile, "Farmers for Farm Credit," a recently formed renegade FCS stockholders' group opposed to a Rabobank merger, says it's concerned about the lack of information flow concerning either of the proposed buyouts. The dissident group's members oppose a loss of ownership and the possible negative implications for the next generation of farmers to attain financing.
Though no FCS-AgStar meetings are scheduled, Hebrink hopes the two parties continue talks.
"Itâ€™s a big step for their organization," Hebrink says. "Weâ€™ve heard from all parties, all sides of this and weâ€™ll continue to follow it. This is a big deal if you are a borrower of dollars in agriculture in Iowa."