Merger revote: CenDak and BTR are back together

Just three votes separated the yeas from the nays when members of CenDak Farmers Union Cooperative reconsidered a merger with BTR Farmers Co-op on Friday, January 5.

 About half of the 386 qualified members cast ballots, 99 of them absentee and another 90 in person on the date of the vote. The final tally was 96-93 in favor of the merger.

 Prior to the official vote, the Board of Directors for CenDak held an informational session to allow members to ask questions about the merger. Directors present included President Lynn Homelvig, John Gisi, Preston Meier, Mark Kallenbach and Ryan Knatterud.

 Several of the questions focused on patron equity and distribution. Primarily, members wanted to know how the new merged cooperative would go about distributing patronage given that CenDak had only retired its allocated equity through 1994, and BTR was paid up to 2010. Homelvig explained that the directors had decided not to make a special equity retirement as part of the merger, but the first $250,000 paid out in any given year moving forward is to go to former CenDak members, and any remaining cash will be paid out to other members at the discretion of the board. "It's going to take awhile, but profitability is how you pay for all this, and that is what we're aiming for, to make this profitable," Homelvig said.

 Land O'Lakes representative Larry Roiger, concurred. "Management's job is to make money, and you don't revolve any equity until you make money," he said. "You don't get to replace assets until you make money."

 As for the retirement of equity, he said, "It's management's job to make earnings, and then it's the board's job to figure out what to do with those earnings."

 Speaking of assets, Eric Carlson, a loan officer for Co-Bank, assured members that Co-Bank has safe loans with both BTR and CenDak. Co-Bank holds the loan for BTR's new fertilizer plant. He also said that "BTR is meeting or exceeding all the financial covenants that the bank has in place," and noted that the bank has a good working relationship with both cooperatives.

 BTR Manager Cris Breidenbach also explained the current state of affairs at the new fertilizer facility. "ADM has a lease at the fertilizer facility. So, the plant has 26,000 tons, and ADM rents 20,000. They pay a lease on that floor space. They also pay a put-through fee."

 Members also asked about the plans for the other fertilizer plants in the CenDak market area. Breidenbach and Homelvig reiterated comments they made after the first vote that they had considered upgrading the plants in Maddock and New Rockford. "We had called for bids after the first vote there, because we were going to put in bins and in-line blenders in New Rockford and Maddock," Homelvig said. "We gotta do something."

 Chuck Valek, another representative with Land O'Lakes, spoke in regards to the chemical situation and whether or not the new cooperative would be more competitive in that area. He said that companies must be "relevant" to the manufacturers. With its recent merger with United Suppliers, Land O'Lakes touches about 50 percent of every acre in the U.S., which makes them relevant.

 "We are doing everything we can to buy those crop protection products at a cost that is competitive that we can pass on to the co-ops so they can be competitive," he said.

 The vote capped off nearly six months of uncertainty regarding the status of the merger. The first vote on July 18 was reported as approved by 55 percent of CenDak members and by at least 70 percent of BTR members.

 Then 25 members of CenDak expressed concerns about the process used to hold the vote. They retained Attorney Leland Hagen and filed suit against the cooperatives on October 9, 2017, alleging that CenDak and BTR leadership did not follow provisions of an important document, the Merger Transaction Agreement, and that copies of the agreement

were not provided to CenDak members prior to the vote.

 The CenDak Board of Directors accepted the terms of a revote as outlined by the plaintiffs on December 7, 2017, and set January 5 as the date for the revote. As per the terms of the settlement, plaintiff Keith Smith sat in on the vote count, which took over an hour to complete.

 General Manager Cris Breidenbach stated after the meeting that the boards would meet soon to complete the paperwork necessary to make the merger effective as soon as possible. On Wednesday, January 10, Homelvig said the boards were working towards an effective date as early as February 1.

 The merged cooperative will operate under the name CenDak Cooperative, the same as outlined in the original merger agreement.