Syracuse, New York
March 6, 2002
Agway
President and Chief Executive
Officer Donald P. Cardarelli today announced details of a
comprehensive plan designed to refocus the Cooperative on a
select group of businesses and significantly strengthen the
Cooperative for long-term success.
"After a long and careful process, Agway has elected to focus
its resources on a select group of businesses where we are
well-positioned for profitability, future growth and service to
our farm and other customers," said Cardarelli.
According to Cardarelli, Agway will retain four selected
business segments: Animal Feed and Nutrition; Energy Products;
Fresh Produce; and Agricultural Technologies.
"These businesses have combined annual sales exceeding $1
billion and they have a clear history and connection to our farm
and cooperative heritage," explained Cardarelli.
At the same time, Agway is taking steps to divest several other
business units.
"We have also made decisions regarding four lines of business -
Telmark, Agway Insurance, Agronomy and Seedway - that we
will immediately begin taking steps to exit," reported
Cardarelli. "The successful sale of these businesses would
benefit Agway by allowing us to strengthen our capital
structure and reduce debt. Also, the businesses we are choosing
to exit are good businesses that would benefit from owners who
will dedicate appropriate resources to them."
"We want our customers and business associates at every level to
remember that it's business as usual throughout Agway as we
implement this plan," said Cardarelli.
Backgrounder
The following is background information for the businesses that
Agway will focus on:
Animal Feed and Nutrition: Agway is the number one supplier of
animal feed products in the Northeast, and a long-time leader in
technical expertise and product innovation. The Northeast region
is a large dairy market that includes the number three and four
states nationally in milk production - New York and
Pennsylvania, respectively. Our animal feed business segment
consists of Agway Feed and Nutrition, which primarily serves
dairy producers in New York and Pennsylvania as well as Agway
dealers, and Feed Commodities International, which serves
producers in New England.
Energy Products: Agway Energy Products (AEP) has been a
cornerstone of the Cooperative since 1936. While still providing
thousands of farmers with their energy needs, AEP has built upon
the Cooperative's strong reputation to become a leading provider
of fuel and energy equipment in the
Northeast, serving nearly 500,000 farms, homes and businesses.
Fresh Produce: Providing fresh produce to consumers in various
market segments is a tangible way to "link what farmers produce
with what consumers want." Agway's Country Best Produce business
is a leading provider of potatoes, onions and other fresh
produce to large chain store customers in the Eastern United
States. Through an integrated network of fresh produce
operations, Country Best
is uniquely positioned to meet the needs of major grocers and
foodservice customers.
Agricultural Technologies: This segment consists of new
technologies that complement Agway's feed and produce segments.
These technologies are key to the successful linking of
farm-produced commodities and the consumer marketplace. The
businesses in this segment include CPG Nutrients, which
developed and manufactures Optigenâ 1200, a concentrated source
of controlled release nitrogen for dairy cows; and CPG
Technologies, the developer of FreshSeal food preservation
products.
The following is background information of the businesses that
Agway intends to exit:
Agronomy:
Agway Agronomy is a seasonal, asset intensive business that
sells fertilizer, crop protectants and farm seed. This business
consists of Milford Fertilizer, Andgrow Fertilizer, Reading Bone
Fertilizer, Agway Farm Seed as well as Agway crops centers and
agronomy storage facilities.
Over the last few years, Agway Agronomy has undergone
significant change as we sold or closed many of our crops
centers in New England, New York and Pennsylvania. As this
market has shifted away from the traditional Agway territory,
sales to Agway members have declined. There is significant
value in Agway's agronomy business that can be realized through
a sale of the agronomy business to a buyer who is better
positioned to participate in this changing environment. Agway
has engaged the investment banking firm
AgriCapital Corporation
to assist us in selling this business.
Seedway:
Seedway sells turf, vegetable and farm seed throughout the
Eastern United States. The seed industry has changed
dramatically since Agway first acquired this business in 1987.
While profitable, continued growth and success in this business
would require a commitment of resources in the future. Given its
relationship to agronomy - and Agway's decision to reposition
away from this area - we believe it is best to divest of this
entity now and recapture the value we have built in this
business over the last decade.
AgriCapital Corporation
will also assist in the sale of Seedway.
Telmark:
Beginning as a small agricultural leasing company started by
Agway in 1964, Telmark has evolved into a national lease
financing source for farming, forestry, construction and other
rural businesses. With a lease portfolio now totaling more than
$700 million, Telmark's growth is dependent on ready access to
capital. Today, Telmark dividends to Agway are limited so that
Telmark may retain its earnings to support its natural growth
and to optimize its ability to attract debt capital. This
approach has been appropriate to date and would be for the
near-term future if Agway were to keep Telmark. Given Telmark's
size, however, its potential for future growth would be better
with an owner that can more
readily access capital markets (in particular, the equity
capital markets) than Agway can as a cooperative. Telmark has a
strong history of earnings growth and is considered an extremely
attractive business in an industry that continues to consolidate
around large financial companies. The sale of
Telmark is designed to allow Agway to maximize its value in
Telmark by converting this asset into cash, which can be
directly applied to restructuring Agway's capital and reducing
long-term debt. It would also enable Telmark to continue to grow
and prosper. We have engaged the investment banking
firm Goldman, Sachs & Co. to assist us in finding an appropriate
buyer for Telmark.
Agway Insurance:
Serving the insurance needs of farmers and other rural customers
in ten states, the insurance company has developed a successful
market niche. This business is profitable but operates at a
competitive disadvantage to larger and better capitalized
companies. We believe it is in the long-run best interest of
both Agway and the insurance company for Agway Insurance to be
associated with another entity that will focus capital resources
on growing the business. Now is an appropriate time to explore
that change and recognize the greatest value for Agway. We have
engaged the investment banking firm Capital Formation Group of
Rochester to assist us in finding an appropriate buyer for this
business.
AgriCapital Corporation was founded in 1983 as a
specialized firm to meet the acute and increasingly specialized
investment banking demands of a rapidly changing agribusiness
industry. Since AgriCapital’s founding, it has undertaken some
400 assignments, including negotiating mergers and acquisitions,
arranging financings, and providing consulting services, on
behalf of over 300 large and small companies across the spectrum
of agribusiness in the United States and around the world.
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