CHS offer with West Central Ag Services grows to $225 million; Arthur Companies also continues purchase bid
ULEN, Minn. — West Central Ag Services will move forward with a Nov. 26 member vote on whether to merge the western Minnesota cooperative with ag cooperative giant CHS Inc. — now with a bigger price tag from CHS.
"We believe that proceeding with the proposed transaction with CHS provides our member-owners with numerous benefits, such as global market access for both grain markets and inputs," said West Central Ag Services Board Chairman Duane Brendemuhl, a Moorhead, Minnesota, farmer in a statement. "While we received and considered another proposal, we continue to believe that CHS is the right fit for us."
The "other proposal" came from Arthur Companies, a Fargo-based company that also made a bid to buy West Central Ag Services. West Central Ag Services and Arthur Companies both are holding meetings this week to talk to farmers about the respective proposals.
West Central Ag Services, based in Ulen, Minnesota, with additional locations in northwestern and central Minnesota, offers crop nutrients, seed, crop protection products, producer financing, crop insurance, grain marketing, and tires and repair. CHS, based in Inver Grove Heights, Minnesota, is the largest farmer-owned agricultural cooperative in the U.S. The two cooperatives are partners in a joint venture based in Hannaford, North Dakota, called Central Plains Ag Services , which formed in 2009.
West Central Ag Services and CHS announced a merger agreement in May , on which patrons had been slated to vote on Nov. 7. According to merger documents, the base cash price offered to the patrons was $200 million. Arthur Companies had made a bid to purchase West Central in April, which was rejected, but the company made a new bid on Nov. 4 for $250 million, restructuring their earlier proposal to take into account tax considerations. The company took the offer straight to farmer-owners rather than just to the West Central board. West Central then delayed its vote on the merger.
"The purpose of our outreach is not to debate the merits of the proposed merger with CHS. Rather we want to make all the facts available prior to the vote and ensure members are aware that management did not engage with qualified third parties looking to provide competitive alternatives," a statement on arthuradvantage.com said.
A statement from West Central Ag Services on Monday, Nov. 18, said the cooperative board met with Arthur Companies officials and with CHS, including renegotiating with CHS, following the Arthur Companies' bid. CHS then upped its offer to $225 million.
"This reflects CHS commitment to this transaction and the owners of West Central. CHS is willing and able to close a transaction with West Central in the coming weeks," Brendemuhl said. "After carefully considering Arthur's revised proposal, as well as the information submitted by Arthur at West Central's request, the Board concluded that the transaction with CHS continued to represent a superior proposal, and better met West Central's and our patron growers' long-term supply and market objectives. We continue to believe that CHS is the right home for us."
The vote on Nov. 26 will require two thirds of the West Central members who attend the meeting to approve. If approved, the transaction will close in the coming weeks. The statement from West Central said the West Central board "concluded that there was a very high likelihood that Arthur may not be able to close a transaction with West Central at all, or if a closing occurred, it would be at a minimum three or four months out, versus an expected quicker closing with CHS."
"CHS offers certainty and near immediate completion. Arthur does not. We have a long history of successful relationships with CHS, as a member cooperative, a customer, a joint venture partner and an occasional competitor. 'A bird in the hand' is no small thing when it comes to transactions like this, and that is what we have with CHS," Brendemuhl said.
Arthur Companies CEO James Burgum said that while an Arthur Companies deal may take a bit longer to close given the short timeframe that the company has been working on its new bid to West Central, he is confident his company can close on its proposal if West Central's growers vote against the CHS merger.
"We appreciate the chance to sit down with West Central's leadership this past week. The Arthur Companies remains willing to work out a deal that prioritizes the growers' bottom line while maintaining competition and great customer service for future generations. We're looking forward to meeting with growers this week, and we encourage patrons to get out and vote on Nov. 26," Burgum said.
The West Central statement touted that going with CHS would keep West Central members as part of a cooperative and that CHS would retain West Central's employees and management team.
West Central will hold patron information meetings about the CHS proposal on Nov. 20 from 10 - 11 a.m. at the West Central Ag Services Office in Mahnomen; on Nov. 20 from 2 - 3 p.m. at the West Central Ag Services Office in Ulen; on Nov. 21 from 10 - 11 a.m. at the West Central Ag Services Office in Beltrami; and on Nov. 21 from 2 - 3 p.m. at CHS Ag Services in Warren.
Despite West Central's board's preference for the CHS deal, Arthur Companies has continued to meet with grower members of the cooperative to discuss the $250 million offer. A letter on arthuradvantage.com from Burgum said company officials "have heard from hundreds of growers since bringing our offer directly to the owners of West Central Ag Services."
Arthur Companies is holding four "Coffee and Conversation" events to discuss the company's proposal. The events are scheduled for Nov. 19 from 1 - 4 p.m. at The Eagles Club in Crookston; Nov. 20 from 1 - 4 p.m. at the AmericInn in Fergus Falls; Nov. 21 from 1 - 4 p.m. at the Shooting Star in Mahnomen; and Nov. 22 from 1 - 4 p.m. at the AmericInn in Hawley.
"We understand West Central growers have a lot to consider. Arthur Companies would like to be part of the discussion to improve your bottom line for future generations," Burgum's letter said.
