CHS Inc. and Land O’Lakes, Inc. said Sept. 4 they have completed the repositioning of two of their Agriliance LLC joint venture businesses. The Agriliance wholesale crop nutrient business has been transferred to CHS, while the crop protection business has moved to LOL.
LOL President and CEO Chris Policinski and CHS President and CEO John Johnson said repositioning the businesses is a sound strategic step for both companies and their customers.
“This repositioning is consistent with our objective of maintaining the most effective farmer-owned presence possible in the crop inputs industry. By aligning each business segment with the core competencies and strengths of each parent company, we can intensify our focus in each of these key businesses, reduce costs and even more effectively supply valuable crop inputs to members and customers,” they said in a joint statement.
CHS will integrate the crop nutrients business, under the leadership of Cheryl Schmura, into its Ag Business segment, which also includes grain and local retail operations. It will provide local retailers and producers with a dependable supply of primary crop nutrients. Its supply network includes a deep-water port at Galveston, Texas, facilities at Memphis, Tenn., and 130 strategically located crop nutrients terminals. Under CHS ownership, the crop nutrients business will benefit from the company’s capabilities in logistics, distribution, risk management, and global trading.
LOL said the crop protection products business, led by Rod Schroeder, will be housed in a wholly-owned subsidiary, Winfield Solutions, LLC, and will be closely aligned with the LOL Seed division. The two businesses will leverage combined technical and marketing expertise in the implementation of a collaborative go-to-market strategy under a new WinField Solutions?äó market identity.
Among the anticipated changes are: expanded joint promotions, marketing, and brand building efforts; coordinated service offerings; and new efficiencies through shared customer service and distribution activities. These efforts also are intended to enhance the cooperative system’s AgriSolutions crop protection product, Origin micronutrients, and Croplan Genetics seed brands. The crop protection products operation also includes an extensive technology and education system.
Schroeder, 51, is LOL’s executive vice president and chief operating officer of the crop protection business. Previously, he held various vice president roles at Agriliance, most recently vice president of crop nutrients and the Heartland division.
In July, CHS and LOL said they were in exclusive negotiations exploring the sale of The Agronomy Co. of Canada, ProSource One, and Agriliance retail locations in the southern U.S. to a group that includes certain members of the Agriliance management team and financial backers. Those negotiations continue.
CHS and LOL will continue to share ownership of the Agriliance agronomy retail business, with expectations that much of it will be sold.
Given the different values assigned to the assets of the crop protection and crop nutrient businesses, the parent companies have agreed that, in order to maintain equal capital accounts at Agriliance, LOL will pay down certain portions of Agriliance’s debt and make a cash payment to CHS. Accordingly, on Sept. 4, 2007, LOL wired out a combined $234 million to Agriliance’s debt holders and to CHS. While LOL did not specify how much was going to debt and CHS, respectively, CHS said on Sept. 4 that it was expecting to receive $32.6 million from LOL.
In addition, pursuant to the terms of the agreement that require a value true-up once Agriliance’s fiscal-year end audit is complete, LOL may be required to make an additional cash payment to CHS. LOL intends to make these payments from available cash on hand and an incremental draw on its accounts receivable securitization facility. Neither of Agriliance’s parents assumed any debt as part of this transaction, apart from selected operating leases.
In conjunction with these transactions, LOL has executed an amendment to its five-year accounts receivable securitization facility (AR Facility), arranged by CoBank, ACB, to increase its borrowing capacity thereunder to $300 million. The amendment will provide LOL with additional liquidity for the incremental working capital swings associated with the crop protection business. LOL also amended its $225 million, five-year secured revolving credit facility, arranged by JPMorgan Chase Bank, to permit the expansion of the AR Facility.
Agriliance distributed agronomy products through approximately 2,200 local cooperatives from Ohio to the West Coast and from the Canadian border south to Kansas. Agriliance also provided sales and services through more than 50 strategically located Agriliance Service Centers, as well as nearly 150 company-owned retail locations. Agriliance’s largest customer was CHS’s country operations business, which is within its Ag Business segment. For the fiscal year ending Aug. 31, 2006, Agriliance had total revenues of $3.7 billion, of which approximately $1.8 billion was crop nutrient products and approximately $1.9 billion was crop protection and other products.