Archive for Thursday, February 22, 2001

Farmers Co-op offered $11.7 million buyout

AGP Grain seeks purchase by spring

February 22, 2001

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A regional cooperative wants to buy most of the assets of the bankrupt Farmers Cooperative Assn.

A subsidiary of Omaha, Neb.-based Ag Processing Inc., or AGP, has offered to buy much of the Lawrence-based co-op's inventory and all but three of its locations for $11.73 million.

Farmers cooperative Assn.'s Midland Elevator north of Lawrence is
included in a possible purchase deal proposed by AGP Grain
Cooperative, a subsidiary of Ag Processing Inc. in Omaha, Neb. AGP
has offered to buy much of the Lawrence-based co-op's inventory and
all but three of its locations for $11.73 million.

Farmers cooperative Assn.'s Midland Elevator north of Lawrence is included in a possible purchase deal proposed by AGP Grain Cooperative, a subsidiary of Ag Processing Inc. in Omaha, Neb. AGP has offered to buy much of the Lawrence-based co-op's inventory and all but three of its locations for $11.73 million.

The offer will be considered during a hearing at 1:30 p.m. March 13 at U.S. Bankruptcy Court in Kansas City, Kan.

The nonbinding offer described by AGP as "a general agreement to proceed in good faith" is contingent on approval from the bankruptcy judge and Ag Processing's board of directors.

"This was one way to sell the whole damn thing and keep it somewhat intact to run," said Don Dumler, FCA's president and chief executive officer. "That's what we needed to see happen, instead of seeing 10 different buyers come in and split it up."

The sale, if approved, would keep many assets of the state's largest cooperative association in operation and help cover FCA's listed debts of $19.7 million. FCA listed assets of $25.3 million in September when it filed for bankruptcy protection under pressure from creditors.

In court documents, FCA officials estimated that proceeds from the sale plus the sale of three properties not included in AGP's bid "will be sufficient to pay all claims of the estate in full." The co-op's biggest creditor, CoBank, is owed about $10.6 million.

AGP Grain Cooperative wants to take possession of FCA's locations soon, so that it can prepare for the spring growing season that typically begins April 1, Dumler said. The co-op has 3,700 members.

FCA officials also would prefer to unload the assets by the end of March, so that they could move on to other issues related to the bankruptcy.

"This is a dissolvement," Dumler said. "How long do you keep the old horse alive when you know he's dying? You just try to do what's best for him. That's where we're at with this."

AGP Grain Cooperative, an AGP subsidiary, has been talking to FCA officials for more than two years about possible partnerships or operational consolidations, said Mike Maranell, AGP's senior vice president of member and corporate relations.

FCA's bankruptcy took those discussions to a higher level.

"We have an interest in seeing that it stays in cooperative ownership," Maranell said.

Specific decisions about how the FCA assets would operate remain undecided, Maranell said. In its letter, AGP said it would pay $4.5 million for FCA's hard assets, excluding FCA's Lawrence headquarters at 2121 Moodie Road; an Ampride station at 23rd Street and Haskell Avenue; and a store in Gardner.

It also said it would buy FCA's remaining grain, fertilizer, propane, oil and other inventories. AGP valued those assets at $7.23 million, but the closing price would depend on market prices and the amount of inventory at the time of closing.

Maranell said he could not guarantee that all of the FCA locations involved would remain operational.

"We have to look at the whole operation," he said.

Maranell said it was too early to tell what would happen to the co-op's staff.

FCA already has trimmed its work force to 53 employees, down from 140 before the bankruptcy filing.

Bob Gales, who had been FCA's general manager for three years before his firing in April, is on the board of directors for AGP Grain Processing.

In court documents, FCA officials said the sale would preserve a "strong agricultural cooperative presence" for area producers, serving agronomy, grain and input needs.

Under the agreement, Farmers Cooperative Assn. would sell the following assets to AGP Grain Cooperative:

Elevators and associated buildings and equipment in Edgerton, Overbrook, Scranton, Burlingame, Pauline, Topeka (two), Perry, Midland, North Lawrence, Oskaloosa, Meriden, Winchester, Atchison and Denton, all in Kansas; plus Bethany and Rushville, in Missouri.

Inventories of fertilizer, agricultural chemicals, petroleum, grain and miscellaneous items.

Existing FCA leases for use of trucks, equipment and railroad lines and properties.

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