Dakota Growers Pasta was sold with little fanfare or criticism this past May in a deal worth about $240 million.
Bill Patrie, director of an organization that promotes and helps the development of cooperatives, said he thinks most people involved with the company are satisfied with the sale.
“They’re not thinking of the next generation,” he said, describing farmers as having a “Take the money and run” attitude about the sale.
Patrie said the “demutalization” of the cooperative in 2004 and its sale to a competitor more recently set a “dangerous precedent.”
Dakota Growers Pasta, the sale of which was finalized in May, started as a cooperative created in the early 1990s by more than 1,100 mostly North Dakota durum wheat producers.
“I think that we started our life as a cooperative ... and that was the right structure for us,” former chairman of the board Jack Dalrymple said. “But as time went on, things changed in the real world.”
He said the decision to change the cooperative to a Class C corporation resulted from multiple factors that made the board question whether a cooperative was the appropriate structure.
“The main reason (for the structure change) was to give us an opportunity to raise capital,” Dalrymple said, to also buy back shares from shareholders who wanted to liquidate as well as perform acquisitions.
Dalrymple, who also is the lieutenant governor, said he doesn’t think it sets a bad precedent and each situation calls for its own structure.
House Minority Leader Merle Boucher, D-Rolette, appealed to the governor for a delay in the sale of Dakota Growers in April.
Boucher, the Democratic candidate for agriculture commissioner, argued that the cooperative was created with the help of the state-owned Bank of North Dakota, other rural cooperatives and the city of Carrington, where the cooperative was based, and that they should benefit from the sale as well.
“The public was very much involved,” he said in an interview. “The people were involved in promoting it.”
Dalrymple, who was a durum producer in the Casselton area, said, however, the cooperative only received a grant for a feasibility study. All other assistance was in the form of loans that were paid back with interest.
There was no delay, however, and Boucher said he wasn’t surprised.
“To turn it back, from the very get-go, I knew it wasn’t going to happen,” he said, describing the sale negotiations as secretive.
By early May of this year, Viterra, Canada’s largest grain handler headquartered in Saskatchewan, bought about 10.5 million shares of common stock and about 9.5 million shares of Series D stock, about 85 percent of Dakota Growers stock.
The right to deliver durum, which was bought by farmers when the cooperative was created, was transferred into Series D stock.
The common stock sold for $18.28 a share. The Series D stock sold for 10 cents a share.
Dalrymple said most stockholders started with an equal portion of common stock and Series D.
He made directly and indirectly about $3.8 million from the sale. He declined to comment on how much he invested, saying it would take a lot of time to go through the papers to calculate.
“The proportion changed a bit over time, but generally speaking, it stayed about there,” he said.
The cooperative was created to add value to durum, Dalrymple said.
Instead of just selling a raw product, farmers bought delivery rights so that the durum would be turned into pasta, which would sell for more, he said.
“(The sale) deprives durum growers the ability to add value to their product,” Patrie said. “The very reason it was created was ruined when they sold it.”
Viterra has kept the chief executive and financial officers — who made $6.5 million and $1 million, respectively, from the sale — in charge of the company.
“Everything’s going very well, I will say that, with the integration into the new ownership” said President and CEO Tim Dodd, who was hired as the general manager of the cooperative when it first started. “It has been business as usual.”
Dodd said he hadn’t made a financial investment in the company but received his stock through options over the years.
“Nothing’s changed,” said Dennis Renner, who lives south of Mandan and is a seller of durum to Dakota Growers.
He said he hasn’t delivered anything since the sale was finalized, but he’s planning on making a delivery in a couple of weeks.
“I don’t foresee any changes,” he said, adding later: “I’m not too concerned about the Canadian ownership. They bought a durum mill, and they’re going to need to buy durum.”
(Reach reporter Emily Coleman at 250-8256 or firstname.lastname@example.org)