Via email,
Not sure if you know anything about the Agrifoods Cooperative. It’s a relic from when dairy cooperatives actually mattered.
A lot of farmers from BC to Saskatchewan have a lot of cash tied up in the coop, and there is a pretty meaningful sized business located there as well. Most of the business is actually yogurt production under the Yoplait brand through a business Agrifoods co-owns with Agropur (the largest cooperative remaining in Canada). Yoplait has decided not to renew the license for yogurt production, and so suddenly the business for these guys will dry up.
So Yoplait offered to buy the yogurt production from Agrifoods at a price that would have given seven bucks a share to members (the current share price is under two dollars). The board said no. They said they would rather start their own brand of yogurt and compete with Yoplait. But they didn’t tell their members. They just told their members the only option was to compete with Yoplait.
So now the members just heard that they could have sold for something like seven bucks a share (or higher) rather than compete and are pretty pissed. There is a activist shareholder group that has a website up and they are trying to get the board to listen to the members and do something in the interests of the farmers.
With more than 2,000 farmers in the co-op and ~20m shares outstanding, this represents up to $140m that could be released to the members, the farmers, if the board listened to their membership and sold the business. Sounds a bit like a certain board that felt it was in the interest of their members to run off and do something crazy like sue the government.
This is all news to me, so I’m posting it for the purposes of information and/or feedback. The Members Action Group website.
In standard businesses the board can be sued.
You should check if the board memeber have officers and directors insurance. If not then the directoirs have a huge potential personal liability.
You would be surprised how often this happens.
And the O+D insurance may be capped or may only cover routine matters not something like this.
In the public share world that kind of thing would have got people fined and thrown in jail as it would have been a material decision.
This should be fun to watch, I can only imagine who is on the Board and how they got there.
Imagine, someone else not telling you about your own money, or someone telling you how to run your business, sounds like the CWB.
Only in Canada would these types of cartels still be allowed.
dairy boards are far worse than the wheat board…thanks to the local dairy board, milk is over $4 for two litres and most imported cheese is $45/kg in this country thanks to a 300% ‘duty’ enacted solely to profit the Quebec dairy industry.
http://www.dairyplanet.ca/story1.html
No surprise here.
The coop movement has run it’s course just like socialism. If you prefer lousy service deal with a coop. They are all the same.
I don’t mind such cooperatives when they are voluntary. Just another type of corporation really. Short of short-circuiting true competition, free people must be able to associate as they wish.
BUT … now that the fit has hit the shan (openly, in public) the QUEBEC-based farmers of the Agropur co-op will get active and demand that their management / board REDUCE the offer from $7/share to maybe $4 or $5 per share.
And as far as “competing” with ANY Quebec based govt-encouraged entity, GOOD LUCK WITH THAT! Free market / capitalist competition always looks easy-peasy to those who have never had to do it.
What a mess. As somebody already said – only in Canada.
Similar situation in the Okanagan where the BC Fruit Growers Co-op is sitting on valuable real estate – mostly from closed processing facilities – that could be sold to get money back into the hands of co-op members – but the board will not entertain offers, usually because the board is philosophically opposed to any development.
So waterfront property in Naramata (for instance) sits idle, costing the co-op taxes, and tying up co-op members’ money in unused assets – of course no assets – no need for paid board members….
The board in this case is really opposed to the sale of the business on the basis that it would eliminate them as a cooperative… a cooperative that does not provide any services to its members. So what’s the issue?
The whole thing is ridiculous. Just sell the damn business and give the money back to the farmers.
I’ve always felt uneasy about the cooperative movement. I think its time has come and gone a long, long time ago. Sort of like unions. But they won’t go without a fight.
Looks like there may be grounds for an application under Section 313 or 340 of the Canada Cooperatives Act (request for liquidation/oppression remedy). The refusal of the board to communicate the truth of the offer may well be an act which is ‘unfairly prejudicial’ to the rights of the shareholders.
Dyspeptic Curmudgeon,
While I agree that there are grounds for a remedy, this remedy only applies to complaining shareholders. To the extent there is insufficient cash to pay those shareholders (as in if everyone complains), then not sure what could be done about it.
That’s why the movement now is to try and get the board to sell the plant to Yoplait so that the cash can actually be distributed to shareholders without a lawsuit required.
By the way, there is a listing of all the delegates on one of the pages there:
http://www.agrifoodsgroup.com/What-Can-I-Do
This includes the members of the board. So if you want to see who is on the board, those are the guys.
I am not that familar with cooperatives but directors have certain fiduciary duties and they would have to show they satisfied those here. Typically, boards would set up a separate deal committee to review an offer, usually with independent directors.
As another posted noted, there could certainly be oppression remedies available and, in any case, the shareholders have the ultimate remedy: replace the board.
It would take three years to replace the board because only a third of the board can be replaced at any one time. If they don’t do this deal in the next six months then it will go away because Yoplait will just build a new plant to compete with Ultima rather than buying the existing plant.
A couple of thoughts:
First, I don’t know where “Bemused” lives, but I’ve been buying milk for $4.19 for four litres ($3.99 when it goes on sale) for the last two years. Last week, I bought two 500g cheese bars (cheddar and mozza) for $3.99 each at my local No Frills. Even the higher end cheeses at the deli are no more than $2.50/100g, or $25/kg, so I don’t where the $45/kg figures comes from.
Now, on to the main event. Yoplait isn’t going to extend the license, but they want to buy the plant? Clearly, they don’t have a problem with the quality, and I suspect the reason for the termination of the agreement is Yoplait thinks they can make more money if they vertically integrate.
Obviously, I’m not privy to the details of the deal, but it’s quite possible that the board decided to play a little hardball here. Threaten to create their own brand, with an advertising campaign based on “We used to be Yoplait, now we’re (whatever), an all-Canadian company”. Probable result for Yoplait – reduced market share, increased cost of building a new plant, reduced margins due to increased competition. So Yoplait reconsiders, and comes back with $10/share offer. Board accepts, farmers get 50% more for their shares than original offer.
I’m not at all saying that is what’s going on, but it’s surely plausible. Haven’t we seen in this in all kinds of takeover/buyout battles? Acquirer comes in with low-ball offer, board fights back, acquirer sweetens deal, board accepts, shareholders get more money.
Tsk, tsk, tsk. Poor farmers.
Continually being lied to by boards, agencies, associations, federations, etc.
When’s it gonna stop. Someone should do something about it….
in Northern Nova Scotia, skim milk is priced, as of yesterday, in Superstore, at $3.99 per TWO-litre carton…however in recent days it’s been as high as $4.03 and may have been ‘on sale’ except that stores aren’t allowed to put milk on sale thanks to the milk board regulations…500g cheese bars were on sale for a very good price (for here) at $5.99, we stocked up, it’s usually anywhere from $7.99 to $9 lately…
On the other hand, I can buy a 2-story house with a garage and a good sized yard for $79,000….
oh, and I picked up a piece of Stilton cheese, which I happen to like, and put it back down again…a small piece was over $5 and the price per Kg was $54 and change…block Parmesan on the other hand, was on sale…I have the package in front of me, 240g was $8.62 and the price per Kg was $35.90
Kevin,
A few issues with that:
1. If they don’t negotiate soon then Yoplait will just build another plant.
2. A lowball offer is not one that results in getting a MINIMUM of 3.5x the existing share price to your members in cash.
3. They didn’t even sit down to talk about it, and so at some point soon they will just run out of time.