Western Sugar Co-op pays $85 million for six plants - Newsline - Brief Article - Statistical Data Included

Rural Cooperatives, July-August, 2002

Sugar beet growers in four western states have seized control over a major segment of the U.S. sugar industry with the launch of Western Sugar Cooperative. The cooperative was born at the end of April after 2 years of difficult negotiations by its predecessor, Rocky Mountain Sugar Cooperative. The talks finally culminated in a deal to pay $85 million for six sugar beet processing plants, storage facilities and a host of other support facilities and equipment belonging to Tate & Lyle North America. The new cooperative will also assume payment of the $i00 million inventory debt to the Commodity Credit Corporation.

Not even a deep freeze in early May that impacted 20 percent of its members' acreage could deter the start of the new co-op. With seed supplies ample, growers moved quickly to replant the 30,000 lost acres. Crop planting had already been delayed by drought conditions in much of its territory: Nebraska, Wyoming, Colorado and Montana.

The drawn-out negotiations went through three agreements and five previous closing dates before a final settlement was reached. To maintain market identity, the cooperative adapted the name of the old company.

Tate & Lyle had owned the plants since 1985, when it purchased them from the bankrupt Great Western Sugar Co. Efforts to complete the sale had been stymied in recent months, partly because capital markets had been affected by the Sept. 11 terrorist attacks and the national economic recession.

Two USDA Rural Business-Cooperative Service programs played a key role in financing the sale. Through USDA's Cooperative Stock Purchase Program, more than 480 growers financed their purchase of $200-peracre equity stock in the co-op. That guaranteed $10 million in Wells Fargo bank loans to cover the producers' equity. The bank will share the investment with a dozen banks in the participating states after closing loans for the growers. USDA also provided the coop with $14 million in Business and Industry Program loan guarantees.

Initially, 143,500 acres were committed to the cooperative and more are expected, now that the purchase has been completed. Growers earlier had been assured of a contract for the 2002 season regardless of who would own the firm. So, despite the extended negotiations, sugar beet planting moved ahead as quickly as weather conditions in the region permitted.

Meanwhile, Inder Mathur, a former chief financial officer for Western Sugar Co., has been named chief executive officer of the new cooperative, according to Rick Dom, board president and a sugar beet grower from Hardin, Mont. He said Mathur would be a good match for the cooperative because "he knows the system and has the respect of other employees." Dorn said he was "delighted that the growers now own Western." He said the new farm bill will "bring stability to our industry and contribute to our success as owners." He invited all area growers to "join with us in building a strong cooperative for our own benefit."

Frank Bush will continue as marketing director for the new Western Sugar. Key management staff are being retained at all six plants. The Denver-based cooperative will operate all the plants this season. They are located in: Scottsbluff and Bayard, Neb.; Billings, Mont.; Lovell, Wyo.; and Fort Morgan and Greeley, Colo. After this season the co-op will assess the future of each plant.

Simultaneously, grower- and community-based groups have been negotiating the purchase of Holly Sugar plants at Torrington and Worland, Wyo. The growers would operate as limited-liability companies. Torrington is on the Wyoming-Nebraska line and near the new Western Sugar Cooperative's refinery at Scottsbluff, Neb. Holly's parent, Imperial Sugar, has reorganized after earlier declaring bankruptcy and earlier this year sold sugar plants in Michigan to a new cooperative.