Merger of two area co-ops targeted for May 1

ORIGINALLY WRITTEN JERRY ENGLER
A proposed merger of farmers’ cooperatives that would join co-ops from Pretty Prairie and Leon to Salina and Hutchinson to El Dorado and Elmdale will become effective May 1 if two-thirds of co-op members approve it at April meetings.

The merger of Farmers Grain Co-op, headquartered at Walton, and Mid-Kansas Co-op, headquartered at Moundridge, would join co-ops that already are partners in such ventures as Team Marketing Alliance for grain sales and Reliance Energy for propane sales.

MKC Manager Bob Nattier said with such close cooperation already, it would be a “nearly invisible merger” to both memberships. Both companies are on the same accounting system. Employees and customer would see no changes from what they are currently used to, Nattier added.

FGC Manager Dave Studebaker said: “We think it’s a win-win situation for both co-ops. It’s a step in the right direction for the future of both of them. It will improve their financial stability and give a higher rate of return on their investments.

“We also have membership in Countryside Feeds, and it will also be a benefit to Countryside Feed members.”

The MKC meeting and vote will be at 7 p.m., April 23, at the Roundhouse Gymnasium at McPherson High School followed by the FGC meeting and vote at 7 p.m., April 25, in the Newton High School Auditorium.

FGC includes facilities at Walton, Newton, Burns, Florence, Peabody, Whitewater and Benton.

MKC includes facilities at Moundridge, Lindsborg, Bavaria, Bridgeport, Buhler, Castleton, Conway, Elyria, Falun, Galva, Goessel, Groveland, Inman, Haven, Hilton, McPherson and Windom.

The newly merged co-op would keep the MKC name and be headquartered at Moundridge, although individual communities would retain place names on facilities.

Nattier doesn’t steer away from a tough question concerning whether this merger can be like the one of co-ops in Northeast Kansas that were headquartered at Lawrence. That merger experienced financial failure and bankruptcy.

He said it was a perfect example on “how not to put together a merger.”

Over several years, they merged with several very weak co-ops, and then did nothing to change what that company had been doing,” Nattier said. “Each location was even buying their own product and pricing to compete with their neighboring location.”

In contrast, he said past MKC mergers over the last 15 years have resulted in margins that dropped by 5.5 percent due to increased buying power for all locations.

He said: “That means on a ton of fertilizer at $200, we are taking $11.50 less margin than we were in 1987. On a gallon of diesel at 80 cents, we are taking 4.5 cents less margin. If we have eliminated competition, it has been to the benefit of the customer.”

He said FGC is not a weak co-op.

“Due to very dry conditions, they have suffered some reduction of crops for the last several years,” Nattier said. “They have had to do a lot of upgrading on facilities and equipment. They have had a couple of rough years but have a very sound balance sheet. The merger would not have a negative effect on MKC’s balance sheet.”

He said the situation is similar to conditions at the time of an earlier merger with Lindsborg.

Nattier said that aided by past mergers that allowed lower costs and margins, more money has been returned to members through cash patronage and equity retirement while MKC has added $8 million in assets in 15 years with little increased debt.

The FGC board first approached MKC in November. Studebaker said the merger worked out since then would be with no money changing hands.

“There will be no gain or loss in connection with the transfer of assets at book value. FGC stock will be transferred to MKC dollar for dollar along with the debts and known and unknown liabilities upon approval of the merger.”

Studebaker said FGC patron stock would be transferred into MKC stock with all benefits and voting rights. Equities would be returned on a current “age of patron” retirement method at age 67 until conversion is made to a new 10-year stock retirement cycle which is already underway for any new business generated after May 1.

Studebaker cited a high achievement by MKC on retiring stock and deferred equities of co-ops it merged with, and retiring estates.

The MKC board size would ultimately remain at nine, but “increase temporarily by three to a total of 12 directors until the current members’ terms run out or they decide to not serve on the board,” Studebaker said.

Current MKC board members come from three districts with three members each, but could be changed to four districts with two members each and one at large at next year’s annual meeting, he said.

Both managers said all employees will be retained with new opportunities offered in case of duplications. No equipment would be moved except to take advantage of weather during peak periods.

The newly merged co-ops would continue to support whatever has been customary in the past for projects such as 4-H, FFA and community events.

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