Two Iowa cooperatives – Farmers Win Co-op in Fredericksburg and Five Star Cooperative in New Hampton – announced in late January that their boards of directors have approved a definitive agreement to bring a proposed merger of equals to a member vote by this summer.
The boards of both co-ops signed a letter of intent in February 2020 to study a potential merger, and formed seven research teams with employees from both organizations to explore the expected synergies and risks of unification. The due diligence process was slowed by the COVID-19 pandemic, however.
“Our goal in facing this situation was twofold: protect our employees’ and communities’ health as best we can, and secondly to continue to operate your cooperatives in a manner that best serves your needs in this ever-changing business climate,” said Ken Smith, CEO and General Manager of Five Star, in a letter to members. “Reporting the results of the employee teams was very difficult, as we believed that being in person was beneficial for this decision.”
The two co-ops said a merger would allow the combined business to make more strategic investments by avoiding duplication and best utilizing the current physical assets and rolling stock. With slimming agricultural margins and growers making more purchasing decisions based on price rather than past loyalty, the two co-ops said unification will allow the business to grow faster than the cost to compete.
“Due Diligence is a critical component of the process. It helps identify the true benefits for our members as well as our employee teams,” said Trent Sprecker, General Manager of Farmers Win. “For this reason, we continued the collaboration throughout 2020 with the boards and employees. I believe we benefited from this additional time.”
No date has been set for the proposed vote and no other details were revealed, including which name the combined business would operate under and whether any existing locations would close due to overlapping territories. For the merger to proceed, a two-thirds majority of voting members is needed to affirm, with a voter turnout of greater than 50 percent for each business.
Farmers Win has 17 locations and more than 200 full- and part-time employees offering grain, agronomy, energy, and feed products and services to growers in northeastern Iowa and southeastern Minnesota. Five Star offers crop inputs, precision ag services, grain marketing and handling, energy, feed, and hardware products from 18 locations serving growers across 14 counties in north-central and northeastern Iowa.
“Both cooperatives are financially strong and similar in size, which creates a rare merger of equals opportunity,” said Tom Shatek, Five Star Board President. “By putting our resources together, we believe we will have a better ability to control our local cooperative and better position ourselves for the future.”