Mergers and amalgamations aren’t unique to national and multinational corporations making billion-dollar deals.
They can also happen in small towns across Western Canada.
In fact, mergers were much on the minds of delegates from 283 local retail co-ops from across the West attending last week’s annual meeting of Federated Co-operatives Ltd.
While the organization doesn’t have a policy for or against mergers, FCL president Glenn Tully did tell delegates from small or struggling co-ops that they should talk about the idea with members when they get home.
Read Also
Manitoba extends Crown land rent freeze
Manitoba government links the continued rental rate freeze on grazing and forage leases to economic and environmental challenges facing the industry
“If you have not had discussions with your neighbouring co-op or co-ops, I encourage you to do so,” he said.
It’s time to put old community rivalries aside, he said, and do what is in the best interests of members and communities.
That could mean anything from sharing some aspects of their businesses to merging completely.
“This is not a question of one co-operative over another co-operative, but rather a question of how to best service the members of both communities in the most economical and sustainable manner,” he said.
In an interview after his speech, Tully said the impetus for mergers is coming from the local level.
“This is not being top-down driven,” he said. “This reflects the fact that the membership is looking for ways to remain viable and competitive so they can continue to serve their members.”
He also acknowledged that FCL’s board and management believe there are opportunities for mergers, acquisitions or service-sharing arrangements that can benefit members.
For example, one local co-op may own a petroleum truck that is not being fully used. Maybe it can work out an agreement with a nearby co-op to deliver petroleum to its members as well, thus reducing costs for everybody.
It can also be difficult for small co-ops to find skilled managers in the local community. It might be easier to find someone to manage a combination of two or three co-ops together.
FCL provides central marketing services including manufacturing, wholesaling and distribution, as well as administrative services to its retail co-op member-owners. Rationalization of FCL’s system has been going on for many years.
Thirty years ago there were 425 local retail co-ops operating under the FCL banner. That number declined to 339 in 1987 and 304 in 1997.
One of the biggest obstacles to further mergers or amalgamations is a reluctance among many co-ops to give up the town name associated with their store, which is often the only significant business in town.
David Ottas is an FCL delegate from the Mervin, Sask, co-op, which is mainly in the petroleum business.
Mervin, which has a population of about 250, is eight kilometres from Turtleford, home to a much larger full service co-op.
But Ottas said there’s no talk of rolling the two co-ops into one.
“Our members prefer that we keep our co-op as it is,” he said. “They would be very upset if we were to suggest merging.”
The two do share some operations, such as an accounting program for petroleum purchases. But Ottas doesn’t see it going beyond that.
“I really don’t see much financial advantage to merging,” he said. “We’ve both got a sizable petroleum base.”
Ivan Ellingson comes from the Valleyview co-op in northern Alberta.
About a year and a half ago, it got involved in discussions aimed at merging with the much larger Grande Prairie co-op.
Those talks foundered because at the time Valleyview was having financial difficulties and Grande Prairie decided it didn’t want to take on that situation.
“I don’t think any co-op wants to take on debt and I think that’s probably one of the major problems with amalgamation,” said Ellingson.
He nevertheless believes amalgamations make sense as a way to reduce costs and keep smaller co-ops in business.
