Some farmers say Agricore United’s assisted sales program feels more like a penalty than an assist.
Former Agricore Co-operative shareholders and equity members recently sold 6.3 million of the 20.5 million shares they received when Agricore and United Grain Growers merged in November.
They were told they should market their shares through AU’s assisted sales program in an orderly manner rather than trying to flog millions of shares to investors on the Toronto Stock Exchange all at once.
But the $8 share price they received through AU’s assisted sales program has some farmers hopping mad.
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“They blew them out on a 52-week low,” said John Sullivan, a farmer and shareholder from Provost, Alta.
UGG’s share price has never closed below $8.50 on the TSE in the past year. On December 12 it dipped to a low of $8 but closed at $8.55.
“That’s what really disappointed me the most. The shares have never sold for less than what we took,” said Sullivan.
Jerry Olsen, a farmer and shareholder from Irma, Alta., sold 1,089 shares through the assisted sales program. He said the $8 share price is about $4 a share less than he was expecting.
“I’ve lost over $4,000 here,” he said.
“Why couldn’t they have sold them two weeks ago for $11.50 per share?”
He feels misled by the company.
Documentation accompanying the application form for the assisted sales program informed Olsen that he would get 1,089 shares in the new company based on a $12.27 weighted average trading price.
That’s the average that UGG’s shares traded at on the Toronto Stock Exchange during the 20 days before Nov. 1, the effective date of the merger.
“They figured out your number of shares at the very peak of the market and then they sell your shares at the very low of the market. That’s really what gets me,” said Olsen.
AU’s director of investor relations said the documentation Olsen is referring to stated that $12.27 was just a valuation used to allocate the shares.
“It indicated that the price we would be able to achieve on the sale of the shares on the assisted sales program would not necessarily be that price.”
Timlick said the reason Olsen and Sullivan didn’t get $10 to $12 per share, which is what UGG’s stock was trading for throughout November, is because they were marketing a huge block of shares at once.
If farmers would have tried to market that amount of shares through the TSE it would have been “chaos,” said Timlick.
“If they all tried to sell at the same time, guess what? The price would have come crashing down.”
He said the assisted sales program provided farmers with an orderly vehicle for selling unwanted shares. Timlick said an individual shareholder could have fetched a better price through the TSE but the group as a whole was better off selling through an orderly program.
“Everybody would like a higher price but we got a price at the end of the day that we could accept.”
In addition to marketing 6.3 million shares through the assisted sales program, AU sold 6.7 million new shares to institutional investors at the same $8 share price. The $53.7 million raised by the offering will be used to pay down debt.
Archer Daniels Midland bought 1.7 million of those new shares and now owns 20 percent of the new company.
Sullivan isn’t pleased with the timing of the new share offering. He said the addition of 6.7 million shares drove down the price he received for the 1,100 he sold through the assisted sales program. He also thinks there should have been more communication with farmers.
“I think they have the responsibility to talk to the shareholders before they blow (shares) out in a fire sale,” said Sullivan.
“They have an obligation to come back and say, ‘Hey, we can only get eight bucks for these things. Is this what you guys want or don’t you?’ “
Sullivan said a lot of farmers don’t understand what happened with the equity they had built up in the now defunct Agricore Co-operative.
