Dairy co-op merger talks ended

Land O'Lakes hears Md., Pa. objections

September 08, 2001|By BLOOMBERG NEWS

ARDEN HILLS, Minn. - Land O'Lakes Inc., the second-largest U.S. dairy cooperative, abandoned merger talks with three other farmer-owned milk cooperatives yesterday in the wake of objections from farmers in Maryland and Pennsylvania.

Land O'Lakes, which had $5.76 billion in sales last year, signed a letter of intent last month to develop a merger agreement with Maryland and Virginia Milk Producers Cooperative Association Inc. Lone Star Milk Producers Inc. and the Arkansas Dairy Cooperative Association.

The talks were called off yesterday after hundreds of members of the Maryland and Virginia group, with members in 10 states, indicated they did not want to become part of a national dairy cooperative, said Land O'Lakes spokeswoman Lydia Botham.

Many members were concerned about losing the equity they had built up in the regional cooperative over the years, said Stephanie Meyers, director of communication for the Reston, Va.-based Maryland and Virginia Milk Producers.

Some were also concerned that they would not receive the same level of attention from a large cooperative, she said.

"Particularly our Amish producers had questions about whether they wanted to be part of such a large national cooperative," Meyers said in an interview. "Many of the members indicated they like the smaller size of a regional co-op."

For a merger agreement to be ratified, two-thirds of the Maryland and Virginia group's members would have had to vote yes. A preliminary vote to gauge member sentiment scheduled for Wednesday was canceled yesterday after the board of directors concluded that the opposition was overwhelming, Meyers said.

The attempt to combine the four cooperatives began to sour almost immediately after it was announced last month, Meyers said.

Board criticized

Maryland and Virginia members criticized their board for announcing merger plans without the knowledge of members. Four hundred of them signed a petition demanding more information from the directors, Meyers said.

The Maryland and Virginia group directors held informational meetings throughout their 10-state territory, at which most members said they were against a merger with Land O'Lakes, Meyers said.

The four cooperatives will continue their East Coast milk marketing joint venture, Advantage Dairy Group, which started in January 2000, Land O'Lakes said.

Maryland and Virginia Milk Producers markets milk and other dairy products for 1,600 farmers in the East and Southeast.

Lone Star, with headquarters in Windhorst, Texas, sells 700 million pounds of milk annually on behalf of 130 farmers in eight states.

Arkansas Dairy Cooperative, based in Damascus, Ark., sells 300 million pounds of milk a year on behalf of 185 farmers in four states.

Land O' Lakes is the second-biggest dairy cooperative, after Dairy Farmers of America.

Prices up 67%

Average wholesale milk prices fell 18 percent to 11.22 cents a pound during the last two years, down from an average 13.66 cents in the previous two-year period.

Prices have risen 67 percent this year after deflated prices drove small dairy farmers out of business and heat waves this summer reduced production in the Midwest.

Land O'Lakes agreed in June to buy St. Louis-based Purina Mills Inc., a $360 million purchase that will make Land O'Lakes the largest U.S. animal feed producer.

Purina Mills shareholders approved the sale Thursday, and Land O'Lakes is expected to close the takeover by the end of the month.

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