1 / 34

“The Decision To Merge”

“The Decision To Merge”. Daniel Wolf November 18, 2008. Upstate Farms Cooperative, Inc. Niagara Milk Producers Cooperative, Inc. Company Backgrounds. Pre-Merger Structure. Niagara DFA Upstate Farms. Farmer Members. Farmer Members. Niagara Milk Cooperative.

dawson
Download Presentation

“The Decision To Merge”

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript


  1. “The Decision To Merge” Daniel Wolf November 18, 2008

  2. Upstate Farms Cooperative, Inc. Niagara Milk Producers Cooperative, Inc. Company Backgrounds

  3. Pre-Merger Structure Niagara DFA Upstate Farms Farmer Members Farmer Members Niagara Milk Cooperative O-AT-KA Milk Products Cooperative Upstate Farms Cooperative Wendt’s Dairy - Fluid milk Bulk Sales - Niagara Milk Coop. Market Balancing Commercial Activity Upstate Commercial - Fluid milk - Cultured Bulk Sales

  4. Reasons to Consider Merger • The primary missions of both Niagara Cooperative and Upstate Farms Cooperative were to be value-added marketers of raw milk: • Generate above class price returns for their members • Stable competitive milk markets • Return on Equity • Through many years of working together at O-AT-KA, Niagara Cooperative and Upstate Farms had come to know and respect one another • We had merger conversations in the past

  5. Timing Seemed To Be Right Both companies were at similar earnings level. Each company would receive full value of their members’ equity shares in the combined company. Apparently without the need for any adjustments to that equity. Reasons to Consider Merger

  6. Reasons to Consider Merger • The merger of the two cooperatives would lead to even higher returns on milk marketing activities for both cooperatives versus what they could accomplish on their own: • A strong leadership position in Western New York; • Synergies in milk hauling, processing and administration; • A sound capital base for more effective execution of growth initiatives (product and geographic) • Increased competitive position to better serve our customers

  7. Reasons to Consider Merger Operational Opportunities • Utilization or rationalization of excess plant capacity: • Combined entity likely will not require 3 fluid milk plants serving the same geography • Consolidation of fluid production should yield substantial savings • Fluid milk production consolidation will create an opportunity to examine new production; such as, specialty products not currently manufactured by either company. • Other Potential Synergies: • Savings in administrative costs • Savings in distribution network may be possible

  8. Reasons to Consider Merger • Our World Is Changing • Merge or Retreat

  9. Reasons to Consider Merger Strategic Opportunities • Niagara and Upstate operate similar businesses with similar goals: • Profitably market member milk long-term, including downstream profits • Greater business value • Operate essentially in the same geography

  10. Niagara Milk Production by Zip Code

  11. Upstate Milk Production by Zip Code

  12. Combined Milk Production by Zip Code

  13. Membership Issues - Benefits Premium programs offered by both cooperatives include: • Volume Incentive Premium • Quality Incentive Premium • Hauling Volume Discounts

  14. Upstate Base capital plan; $4.00 per cwt. annual production. Current average member equity investment of both organizations is near equal on most recent annual production. No membership dues. No capital deduction. Niagara Five year revolving plan. Current average member equity investment of both organizations is near equal on most recent annual production. Membership dues. Membership Issues – Equity Investment

  15. Upstate 3 areas 12 person board; staggered 3 year terms Current 47 person delegate body Niagara 12 districts 12 person board; annually elected by districts No delegate body Pre-merger Governance Structure

  16. Board Interim Board For 3 Years From Upstate: 12 Existing Members From Niagara: 5 Existing Members For A Total Of: 17 Members After 3 Years Likely 12 – 15 Person Board Elected From The Delegate Body Determined By Interim Board Board Representation Proposal

  17. Interim Upstate Delegates; 47 Members Niagara Board; 12 Members For Total Of 59 Members After 3 Years From Each Area, Based On Delegate To Member Ratio As Determined By Delegate Body and By-Laws. Delegate Representation Proposal

  18. Other Strategic Considerations • O-AT-KA Included in the Consolidation • Tax Considerations • Potential Pension Withdrawal Liability

  19. The Merger – Unity/Issues • Delegates of Upstate Farms and members of Niagara Milk Cooperatives voted and approved the merger • A few Niagara Milk members left • Even fewer Niagara Milk members became “dissenters” using NY State Law • Asking court to be paid more than the amount in their equity account

  20. The Cooperative That’s Just A Little Different UPSTATE NIAGARA

  21. Upstate Niagara Cooperative, Inc. Created by the Merger of Upstate Farms & Niagara Milk on July 1, 2006 USF created by merger of local Cooperatives in 1972 Niagara Milk created by farmers in Niagara County in 1933 Included 90% ownership of O-AT-KA Owned by Farmers & Cooperatives 400+ Individual Dairy Farmers Other Cooperatives Dairy Farmers of America (DFA) Dairylea The Merger

  22. O-AT-KA Created to clear markets and ensure home for all member milk Founded in 1958 by Genesee Valley Cooperative & WNY Cooperative of the Rochester market Frontier Federated joined in 1961 Dairylea joined in 1962 Niagara County Cooperative (Niagara Milk) joined 1967 O-AT-KA Board approved the sale of Dairylea ownership to Dairy Farmers of America (DFA) in 2005 The Merger

  23. The Milk Marketing System The Milk Marketing System

  24. Corner Stones of: The Milk Marketing System The Milk Marketing System Packaged Fluid Milk Market Balancing

  25. O-AT-KA provides security by guaranteeing markets and adding value in three key areas Market Balancing (dairy commodities) Core Products (evap milk 30% US/PR market) Value Added Specialty Beverages The Milk Marketing System The Milk Marketing System

  26. Members Nominate and Elect Area Delegates = Delegate Body 9 Area Directors6 At-Large Directors (elected by Area Delegates) (elected by all Delegates) ____________________________________ 15 Member Board of Directors Upstate Niagara Governance

  27. Directors 2008200920102011 Total Directors 16 15 15 15 After Election Delegates 2008200920102011 Total Delegates 57 55 53 51 After Election Transition Period

  28. 2008 Member/Voting Units 129 Voting Units/ Members AREA II AREA I 138 Voting Units/ Members BENTON SPARTA Area II Town/County (not shown) Addison/Steuben Fayette/Seneca PORTAGE NUNDA OSSIAN HUME RUSHFORD CANEADEA AREA III Thompson OH 131 Voting Units/ Members Revised Corry PA

  29. Upstate Niagara 3 Areas Board of Directors 3 Area Directors from each area 6 At-Large Directors Staggered 3 year terms Delegate Body Area Delegates, based on delegate to member ratio as determined by Delegate Body and By-Laws Approximately 50 delegates Staggered 3 year terms Current Ratio 1:7 (1 delegate to 7 members) Upstate Niagara Governance

  30. Voting Units/Representation • Goals for transition from Interim to Permanent Governance Structure: • Approx. 57 delegates after 2008 elections and approx.55 delegates after 2009 elections • 16 directors after 2008 elections and 15 directors after 2009 elections

  31. Upstate Niagara/ O-AT-KA Structure

  32. Together Toward Tomorrow Upstate Niagara Simply Working,

  33. Thank You

More Related