Farm Credit is now ‘off the market’

SALEM, Ohio – Farm Credit Services of America is no longer for sale, even after its potential buyer raised its bid to $750 million.
Under pressure from other Farm Credit System agencies, the bank rejected Dutch-owned Rabobank’s offer.
Farm Credit Services of America is the second largest agency in the nationwide system and services Iowa, Nebraska, South Dakota and Wyoming.
The bank’s board of directors said in a statement Oct. 21 that it refused the offer because it feared the transaction’s approval would be lengthy. The bank’s funding source, AgriBank, also changed its funding practices after the acquisition announcement, the directors said.
Since the offer was announced in July, critics claimed the sale may start a precedent, where for-profit banks could purchase Farm Credit agencies. The government offers Farm Credit, and its shareholders, protection that would be gone if a for-profit bank purchased it.
More choice? Rabobank said it was disappointed with Farm Credit’s decision because it would have offered customers more banking services.
Rabobank’s head of Americas for Rabobank International, Cor Broekhuyse, blamed the pressure from other Farm Credit agencies as the reason why Farm Credit Services of America backed out of the deal.
He said their criticism was based on “fear of having to compete with a combined FCSAmerica-Rabobank entity.”
Although this deal did not work out, Rabobank is not deterred. It plans to significantly increase its investment in American agriculture by increasing its Rabo AgriFinance and Rabo AgServices divisions.
It also plans to make further acquisitions in the U.S. agriculture sector.
Outside the system. By rejecting the offer, Farm Credit Services of America must accept there are limits to its lending abilities, said American Bankers Association’s John Blanchfield.
If an agency wants to offer more choices, it should do so outside the Farm Credit System and should be allowed to exit, he said.
“[The] decision illustrates that it is more comfortable remaining a special-purpose, tax-advantaged, government-sponsored lender with a limited, federally mandated mission,” Blanchfield said.
Board decisions. Farm Credit Services of America also rejected a proposed merger from AgStar Financial Services based in Mankato, Minn.
The board also agreed on a patronage plan to divide $55 million between the bank’s borrowers. The amount will be based on the customers’ loan and lease balances payable in early 2005.
(Reporter Kristy Hebert welcomes feedback by phone at 800-837-3419, ext. 23 or by e-mail at khebert@farmanddairy.com.)