CoBank and US AgBank in Due Diligence for Completion in 2011 of MergerWed, 05 Jan 2011 20:40:16 CST
If regulators and shareholders approve a proposed merger of Denver-based CoBank and U.S. AgBank of Wichita, Kansas, the Farm Credit System will be shrunk to four regional and national banks. The other three wholesale banks are based in St. Paul, Minnesota, Columbia, South Carolina, and Austin, Texas. As of today there are only 92 lending associations across the nation. That compares to more than 1,000 that dotted the country-side during the late 1980s.
The combined bank would serve as a wholesale provider of financing to Farm Credit associations that provide credit and financial services to tens of thousands of farmers, ranchers and other rural borrowers in 23 states. It would also serve as a direct lender to agricultural cooperatives and rural electric, water and communications service providers throughout the country.
The merged bank would continue to be organized and operate as a cooperative, with eligible borrowers earning cash and equity patronage based on the amount of business they do with the organization. On the effective date of the merger, the CoBank and U.S. AgBank boards would be temporarily combined. Following a transition period, the merged bank's board would have directors elected from six regions across the country under both a one-member-one-vote and modified equity basis an arrangement that has been successfully used at CoBank for over 20 years. The board would also have a number of outside and appointed directors. Complete details on the governance structure will be provided to stockholders in mid-2011 when merger disclosure materials are finalized.
The merged bank would continue to do business under the CoBank name and be headquartered outside of Denver, Colorado, but it would maintain U.S. AgBank's existing presence and operations in Wichita, Kansas, and Sacramento, California. Robert Engel, CoBank's president & chief executive officer, would be the chief executive of the merged entity.
Detailed due diligence will soon be underway by both banks. There will also be a formal effort to solicit input from the other Farm Credit Banks and other System institutions on the impacts and implications the merger might have at the System level. In late March, the banks plan to submit a merger disclosure document to the Farm Credit Administration (FCA), the independent regulator for the Farm Credit System, for its review and preliminary approval. The merger proposal will also need to be presented to and approved by stockholders of the two banks. If stockholders endorse the transaction, the merger is expected to close on October 1, 2011.
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