West Central Ag customers weigh $200 million offer for CHS and Arthur Companies’ $250 million offer – InForum

ULEN, Minn. – The farmer-owners of West Central Ag Services in western Minnesota will decide Thursday, Nov. 7, whether to merge with CHS Inc., the largest farmer-owned agricultural cooperative in the U.S. During the merger, Arthur Companies also informed the members that it was interested in taking over the cooperative.

CHS has offered a $200 million deal to acquire West Central Ag Services. Residents will vote on the proposal on Thursday. But James Burgum, CEO of Arthur Companies, said his company has been interested in purchasing West Central for $250 million since the spring. The company presented its proposal directly to West Central Ag Services members on Monday, informing them of the alternative option.

West Central Ag Services, based in Ulen, Minnesota, with additional locations in Ada, Beltrami, Felton, Foxhome, Lake Park, Mahnomen, Park Rapids and Perley, offers crop nutrients, seeds, crop protection products, producer financing, crop insurance, grain marketing, and tires and repair. Based in Inver Grove Heights, Minnesota, CHS is the largest farmer-owned agricultural cooperative in the U.S. diversified into energy and lubricants – with the Cenex brand – animal nutrition, oilseed products and agronomic services and products.

West Central Ag Services and CHS announced a merger agreement in May

which the clients will vote on on Thursday at 8 a.m. in Ulen. According to the merger documents, the base price offered to customers is $200 million.

West Central Ag Services and CHS have already worked together in a joint venture based in Hannaford, North Dakota

Central Plains Ag Services

founded in 2009. The cooperative has locations in the North Dakota cities of Aneta, Cooperstown, Courtenay, Luverne and McVille, along with a fertilizer hub and 2.8 million bushel shuttle loading facility in Hannaford.

When the West Central-CHS merger proposal was announced in May, representatives from both cooperatives released statements about their long-standing relationships, strengths and similarities. CEO Jesse McCollum said Tuesday that changes at West Central are about building better connections across the supply chain. CHS’s global connections “connect a lot of boxes,” he said.

“This isn’t about today,” he said. “This is about ten years from now.”

McCollum said the other benefit for CHS is that the company remains in a cooperative system.

“That’s the business we’re in and it makes a lot of sense for our farmers,” he said.

But not everyone agrees that joining CHS is the right step.

West Central Ag Services farmers who are voting on the merger have been discussing the issue online for weeks, asking each other questions about what could change if CHS takes over. Some have pointed out that the merger disclosures include millions of dollars in bonuses for McCollum and CFO Blain Christianson. However, McCollum clarified that the documents only mention West Central’s bonus disclosure, and not anything related to the proposed merger.

“That doesn’t affect who we sell to,” he said. “That is not part of the negotiations with CHS.”

Other online concerns about the merger include the loss of local control and less competition.

Burgum said Arthur Companies believes a new offer it presented Monday offers “a stronger alternative for growers,” which he wants West Central members to see.

“We feel like we would be a really good fit,” he said.

Arthur Companies was founded in 1906 and operates grain and agronomy businesses in North Dakota and

Idaho

and also operates fertilizer, wheat and “proprietary trading businesses,” according to its website. It also partners with food and ingredients company Anchor Ingredients. Burgum said Arthur Companies offers many of the same services and access to markets as West Central Ag Services. He said because Arthur Companies is a family business and not a cooperative, it does not pay out patronage. However, he believes that because Arthur Companies is a privately held company, it has to work harder to be competitive for customers.

The company sent messages to West Central members on Monday and set up a website:

arthuradvantage.com

with details about the offer.

“We want to make sure everyone is fully informed when they vote,” Burgum said.

Burgum explained that Arthur Companies heard earlier this year that West Central Ag Services may be looking to sell and submitted an unsolicited proposal to purchase the cooperative.

McCollum said Duane Brendemuhl, chairman of the West Central Ag Services board of directors, informed Burgum that the cooperative had rejected Arthur Companies’ proposal. Burgum said he was informed that the co-op planned to sign with a third party.

“Through that process, we were told that we had been outbid by CHS, that (they) had a stronger proposal,” Burgum said.

McCollum said Arthur Companies did not counter its original offer.

“We didn’t hear from them until early yesterday morning,” McCollum said Tuesday.

“I thought we were outbid,” Burgum said.

However, Burgum said that Arthur Companies officials had not had a chance to review the CHS proposal until last week and realized that the Arthur Companies’ bid had been competitive. According to Arthur Companies, the new proposal it submitted on Monday was the same in value as the April offer. However, its structure was adjusted to address members’ concerns about tax implications. McCollum said West Central is considering the new offer.

“Right now we’re assessing that offer and deciding what that really means,” he said.

However, Thursday’s vote is still ongoing and if voters approve the merger with CHS, it will proceed, he confirmed.

The website arthuradvantage.com contains a letter from Burgum that provides some background information on Arthur Companies and his interest in purchasing West Central. Burgum offered to personally discuss the proposal with interested farmers.

“Even though we came up with a superior proposal, we could not get an audience with the board or management,” Burgum writes in the letter. “It is clear that management had a strong incentive to support the alternative proposal rather than attract additional interest. The purpose of our outreach is not to discuss the merits of the proposed merger with CHS. Instead, we want to make all the facts available before the vote. and to ensure that members are aware that management has not engaged with qualified third parties seeking to provide competitive alternatives.”