Cedar Country, Lakeland, United Ag Cooperatives to merge

By LeAnn R. Ralph

COLFAX — When Cedar Country Cooperative (Elk Mound), Lakeland Cooperative (Ridgeland) and United Ag Cooperative (Almena) merge, the new cooperative’s service area will stretch from Superior to south of Menomonie.

The three cooperatives announced the merger, which will be effective October 1, in a news release dated April 18.

The new cooperative will have projected annual sales of $180 million.

Cooperative consolidation has been intense in recent years.

“I think when I started managing here in Colfax in ‘03, there were 60-some farm supply co-ops in Wisconsin. We are now down to 22 or 23,” noted Kyle Knutson, general manager for Cedar Country Cooperative.

A majority of the members of the cooperatives voted in favor of the merger, with 64.5 percent of all ballots cast being in favor.

A 50.1 percent majority was required for the merger to take place.

“We plan to keep local presence in every community and maybe expand on that a little bit,” Knutson said.

The three Boards of Directors have a strong resolve to continue providing the same level of services, said Karl Varnes, general manager at Lakeland Cooperative.

“It’s important to the membership. No one wants to lose services … we plan to maintain the level of service they have now and hope to improve on it,” he said.

Equity is another important consideration in the merger.

One advantage for cooperative members is that the equity retirement “will come much faster. We continually worked, or could continue to work, to lower it, but with (the merger) it will come immediately,” Knutson said.

Varnes agreed. “The main driver was for customers to be able to revolve their equity faster and get their investment back faster,” he said.

“It has always been a goal to continuously reduce that redemption age. In my opinion there is nothing worse than giving it to an estate. I would rather see the member (receive the equity) while they can enjoy it,” Knutson said.

“Protection of member equity was a key factor,” said David Schoonover, general manager of United Ag Cooperative.

Although some mergers occur at a discount with pennies on the dollar, the Cedar Country, Lakeland, United Ag merger is “dollar for dollar,” he said.

“That was a key objective,” Schoonover said.

Purchasing power

Economies of scale and the ability to purchase product at more competitive prices along with the improved use of assets was another important factor in the decision to seek a merger.

“When you look at where our trucks go, United Ag out of Almena and Lakeland are coming down as far as south of Wheeler. Cedar Country trucks are going up past Prairie Farm as well as Clayton and Clear Lake. It makes a lot of sense on the efficiency side,” Knutson said.

The cooperatives “are each currently successful but this is a long-term solution,” Varnes said.

The cooperatives are not in a situation where they “must” merge but are merging because it presents greater opportunities, Knutson said.

With overlapping service areas and members, “this is a better use of equity, and a better use of assets,” Varnes said.

Some customers have accounts with two of the existing cooperatives.

The customers with overlapping accounts will be merged into one account when the merger is complete, Varnes explained.

The projected savings from the merger is $1.5 million a year.

“That’s being very conservative, I believe,” Knutson said.

The three cooperatives all use the same accounting system, too, and they use the same auditing company, the same banks, the same insurance company, and they have the same fiscal year-end.

Because of the already-shared business components, the transition will be fairly smooth, Knutson said.

Employees

And then there is the employment aspect.

A larger company will offer improved employment opportunities for employees in a competitive market place.

“One of the key things is the recruitment and retention of key people,” Knutson said.

“Size and scale makes a difference in attracting and retaining employees. We have great people we want to retain. In the past we have seen our agronomists be recruited by our vendors. Size and scale will give us more opportunities to keep them, and I think that’s critical long-term for our business,” Knutson said.

The new cooperative will make it easier to retain, hire and train key employees, Schoonover said, noting that a larger organization will provide a better career path.

“The labor market is very different than it was five years ago,” he said.  

“Going forward, we will probably need more people. There are no lay-offs. No facility closures are planned,” Knutson said.

“Some employees are nervous, and I understand. I try to be as clear as I can. If you want to work here, you will work here,” he said.

“All office locations will be kept open. We will have one administrative office for all, but the others will remain,” Varnes said.

Because of the merger, specialized positions will be created that will need to be filled, Schoonover said.

Agronomy, grain, refined fuels, propane and feed are hallmarks of each company. Convenience stores, tire and repair shops and a farm equipment dealership, including Versatile, LS Tractor and Gehl brands will be part of the cooperative.

Well-known and respected brands such as CENEX, Holiday Stationstores, A&W and Subway will offer customers a wide variety of retail shopping.

New board

The name of the new company has yet to be determined.

The next step is for each Board of Directors to select four directors to serve on the new Board of Directors.

The plan is to have 12 on the new Board of Directors for a year and then reduce down to nine, Knutson said.

Trade areas with the current cooperatives will all have the same number of directors to make sure each has equal representation, he said.

“We want to keep representation all the way through the trade areas we serve,” Knutson said.

Board members will determine the location of the main office and will select a general manager.

Interviews for the general manager’s position will, if all goes according to plan, be held in May.

All three general managers will be interviewed for the manager’s position in the new cooperative. The other two remaining general managers will have other positions in the company.

“We want to make sure (the cooperatives) are there for the next generation,” Varnes said.

The electrical cooperatives, supply cooperatives and telephone cooperatives were formed when services were not available, he noted.

The goal is to supply a product with ownership for the customers at a competitive price, Varnes said.

The cooperatives were formed in the 1930s to create a pool of money and services for the patrons, Schoonover noted.

Although the new cooperative will be much larger, the goal of providing services for the patrons is not going to change, he said.