West Central, FC to study merger

By DOUGLAS BURNS
d.burns@carrollspaper.com

A proposed merger of West Central and Farmers Cooperative would build what West Central’s CEO says is the largest cooperative in Iowa — one that, based on reports from last fiscal year, could expect annual sales near $1.5 billion.

“Both West Central and Farmers Cooperative have long, strong traditions in Iowa,” Milan Kucerak, CEO of West Central, said in an interview Tuesday with The Jefferson Herald.

A letter of intent signed by both boards calls for the headquarters of the merged cooperative to be in Ames, with strong regional presences in Ralston and Farnhamville.

Kucerak, a Jefferson resident, would serve as CEO.

“We have a lot of people that work in Ralston and in Farnhamville that have many, many years in with the company, very talented individuals that we wouldn’t want to lose,” Kucerak said.

Ralston-based West Central and  Ames-based Farmers Cooperative would pick a new name for the combined cooperative. No potential names have been released publicly.

The new name will be identified before members sign off on a final approval.

“There’s a strong heritage with both names,” Kucerak said. “Ideally, it would be nice to come up with a name that would build on the heritage of both coops.”

West Central employs 275 people full time, and FC lists 450 full-time employees.

Some employees’ roles may change, but there are no plans to let people go under a merger, Kucerak said.

“I do not see reduction in staff,” he said. “The bottom line is we need good people.”

West Central has 3,500 members and FC 4,000. There are 700 members of both cooperatives.
According to information from the U.S. Department of Agriculture, Farmers was the 21st-largest cooperative in the nation in 2013. West Central was the 41st that year based on a variety of data, from sales to assets.

Last fiscal year, West Central posted sales of $633 million and FC $785 million.

Kucerak said both cooperatives have strong balance sheets and can continue to flourish independently. The merger will improve productivity, diversify the business, create a strong lure for talent and improve strategic channeling of resources, he said.

“They recognized, as did we, that to be relevant in the global marketplace, we need to look at what makes sense for our cooperative to have a sustainable competitive advantage long term,” Kucerak said.

“Its wasn’t a poker game, it was cards on the table,” Kucerak added.

The boards of both cooperatives unanimously approved the first step toward a potential unification with the signing Monday of a letter of intent to merge.

The move would bring about a quarter of the farm real estate in Iowa into the merged network, and bring a north-south map into play, Kucerak said.

“This letter of intent allows us to further explore equity, governance, organizational structure, asset investment and other member-focused efficiencies,” said Sue Tronchetti, a Paton-area farmer and chairwoman of the West Central board.

The boards expect to have a report from a consultant by the end of November.

If the numbers look good, as Kucerak expects them to, the board will vote to take the merger to the full memberships where at least half the members must vote, and approval requires two-third support from each board.

The membership is expected to vote in December or January, and if the merger is approved, it would become official 90 to 150 days later.

A unified cooperative would have nine board members from West Central and FC.

“In our first series of discussions, we have identified several opportunities that we believe will benefit our members today and for decades to come,” said John Scott, an Odebolt-area farmer and president of the FC board of directors.

“We recognize we must continue to serve the needs of our members in order to remain relevant in a global supply chain and in turn, protect our members’ cooperative investment,” Tronchetti added.

“Our early discussions highlight opportunities to improve productivity by sharing resources to better deploy assets like application equipment, rail access and truck logistics,” FC CEO Jim Chism said. “Being more effective in our execution would reduce costs and allow us to better serve customers.”

Chism added, “We believe the opportunities in a combined company would also provide more consistent, value-added customer service.”

“Each organization brings unique strengths to the table which we believe would further diversify our businesses,” Kucerak said. “For example, FC has access to every major rail line in Iowa and West Central has built-in soybean demand for 20 million bushels annually at our SoyPlus manufacturing plant.”

“In addition, by strategically channeling capital we would be able to target larger, more substantial investments to benefit members,” Kucerak added. “We aim to always better utilize member resources and in turn, improve our services.”

In coming weeks, the companies will host a series of employee and member meetings. Then the boards will determine whether to take the unification proposal to a membership vote.

Should the process move to a membership vote, both FC members and West Central members would vote.

About Farmers Cooperative Company (FC)
Farmers Cooperative is headquartered in Ames and is one of the largest farmer-owned agriculture cooperatives in Iowa.
FC serves more than 5,000 members in a trade territory of more than 3 million acres. Members are served from 46 locations.

About West Central Cooperative
West Central is a farmer-owned cooperative headquartered in Ralston.
West Central’s agronomy, animal nutrition and grain businesses span 12 Iowa counties with locations in 24 communities.