FCSA Rejects Rabobank Buyout Offer
Farm Credit Services of America says the board has voted not to accept Rabobank's acquisition or the merger offer from Minnesota lender AgStar.
Compiled by staff
Published: Oct 21, 2004
The Farm Credit Services of America (FCSAmerica) board of directors has chosen not to move forward with a sale to Dutch-lender Rabobank or Minnesota based AgStar at this time.
According to a statement from Rabobank, FSCAmerica's board decided to terminate the acquisition agreement between the two companies that was approved on July 30, 2004.
Cor Broekhuyse, head of the Americas for Rabobank International believes the board may have been subject to "undue pressure by certain FCS institutions and other third parties whose actions and statements were motivated primarily by fear of having to compete with a combined FCSAmerica-Rabobank entity."
Rabobank still has plans to significantly increase its investment in American agriculture by systematically expanding its Rabo AgriFinance and Rabo AgServices divisions, and by making further acquisitions in the U.S. agriculture sector.
"We congratulate the board on taking this action and recognizing the importance of maintaining Farm Credit's core principals - farmer-ownership and its mission of service to rural America," says Farm Credit Council President and CEO Kenneth E. Auer.
"We believe this episode highlights the challenge facing Farm Credit as it works to fulfill its mission," says Auer. "Agriculture is evolving and the needs of farmers, ranchers, and rural communities are changing. Farm Credit should have the flexibility - either through changes in regulatory restrictions or through changes in federal law - to meet those changing needs."
Paul Folkerts, a Davenport, Nebraska, farmer and chairman of the FSCAmerica board, says he is disappointed with the outcome of the acquisition process but is ready to move forward. "The proposed transaction would have provided a great opportunity to serve the needs of farmers and ranchers who work every day in an ever-changing agricultural world," Folkerts says. "Nevertheless, the board of directors concluded that it was not in the best interests of FCSAmerica to move forward with the transaction."
FCSAmerica Board Rejects AgStar Proposal
Separately, FCSAmerica's board unanimously rejected the merger proposal submitted by AgStar Financial Services, ACA, a Farm Credit association based in Mankato, Minnesota. According to Folkerts, the FCSAmerica board of directors concluded that the proposed AgStar merger was not in the best interests of FCSAmerica stockholders for reasons including the following:
- The proposed merger would have reduced the combined entities' capital position dramatically and would have added significant preferred stock issued to other Farm Credit entities. The preferred stock had many debt-like features, including high dividend rates. The combined impact of these financial changes would have made it difficult to sustain a cash patronage program and a competitive interest rate pricing structure to customers.
- The proposed merger involved significant restructuring of the balance sheet including the selling off of a major portion of customer loans and the issuance of the preferred stock, all of which raised practical business issues and regulatory issues which were uncertain as to outcome and timelines.
- The proposed merger would have created an association with one of the weakest capital positions in the Farm Credit System, potentially jeopardizing the company's ability to stay with customers during the adverse cycles inherent in the agriculture economy.
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Tagged: farm, Agstar, Farm Credit Services
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