Co-op merger defeat reflects grassroots concerns

DENVER – The failure of two giant cooperative systems to garner the necessary shareholder approval for a proposed merger illustrates the depth of producers’ concerns over the ability of the unified co-ops to remain accountable to their local farmer-owners, according to the president of the Rocky Mountain Farmers Union (RMFU).

In results announced Tuesday, the leaders of Farmland Industries and Cenex/Harvest States acknowledged that the proposed merger agreement had failed to receive the two-thirds majority approval required from shareholders of both entities. In particular, the vote among the Cenex/Harvest-States shareholders doomed the deal.

Dave Carter, president of the RMFU, said the outcome reflects grassroots uncertainty over the relative financial health of the combined entities, resentment over generous executive severance packages, and concern about the continued loss of accountability to local producers.

The board of directors of RMFU voted in June to oppose the proposed merger. At the time, the Farmers Union board said the details of the proposed merger agreement failed to meet the goal of creating a stronger producer-owned system to compete in a concentrated global economy.

“Cooperatives, by definition, are intended to represent the economic interests of their patron-shareholders. This merger simply did not meet that test,” Carter noted. “Producers want strong co-ops, but they also want those co-ops to be accountable to the local owners.”

In opposing the proposed merger, Farmers Union had argued that:

• Farmland’s uncertain financial status could serve as a drag on the combined entity;
• Proposed management severance packages were excessive, including $5 million for two top executives;
• The proposed governance structure diluted the voice of domestic producer-shareholders;
• The aggressive timeline for completing the merger prohibited adequate shareholder debate; and
• The similarity of the merged entity to a private corporation would jeopardize current laws designed to protect cooperative businesses.