One of Canada’s largest poultry processors voted to end its 65-year life as a co-operative and move to a share structure, said its chief executive officer.
During its annual meeting in June, an “overwhelming” number of Lilydale producer delegates voted to end the co-operative structure.
“This is not about co-op structure being a bad structure,” said CEO Ed Rodenburg.
“The co-op structure has worked very well. It is not the vehicle that can continue to take us into the future.”
Under the present policy, Lilydale’s 1,336 producer-owners cannot withdraw their equity from the co-op until they are 65. There is $62 million of equity in the company and one-third of the members are over 60 and will be able to withdraw their equity soon.
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“In the next five years a very significant part of equity could flow out of the organization,” Rodenburg said.
The large withdrawal could put Lilydale in a severe cash crunch, said Erv Wiens, a poultry producer and chair of Lilydale Foods board of directors.
Under the new structure, the producers will be able to convert their membership equity into common shares or subordinated debentures of the new corporation.
Under the subordinated debenture program, producers can loan their equity back to Lilydale at five percent interest over five years.
The new share structure will allow members to take part in share sales held once or twice a year.
The move also allows the company to access outside investment capital. Three years ago Lilydale suffered one of its largest losses and was forced to restructure. It closed a processing plant and an egg facility.
While the company is back on sound financial ground with annual sales of $500 million and recently posted record annual earnings, it learned the membership is limited in how much money it can raise during troubled times.
“We went through a very difficult time three years ago and learned membership have limits of what they can do,” said Rodenburg.
“This provides new options of funding the organization beyond the membership.”
Under the new structure, Lilydale’s 2,700 employees will now be able to buy shares.
There are 550 active members in British Columbia, Saskatchewan and Alberta raising broiler chickens, turkeys and hatching eggs. Recently the company opened a plant in Quebec.
