It’s a business decision, designed to achieve business objectives.
But since the company making that decision is Saskatchewan Wheat Pool, a company so closely tied into the history and social fabric of the province, it’s not quite that simple.
The “capital markets initiative” announced Dec. 14 will officially mark the end of the pool’s 80-year history as a farmer-controlled business co-operative.
The pool’s plan will see the creation of a single class of common voting publicly traded pool shares, with no special rights or privileges for farmers.
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The move is designed to provide access to equity markets, reduce debt, lower interest costs and normalize the pool’s share price.
“We need to change the structure to eliminate our convertible notes as debt and move them into equity,” said chief executive officer Mayo Schmidt.
While some say the pool effectively ceased to be a farmer co-op years ago, the new share structure will formalize the demise of the company’s co-operative structure.
“I think it’s a cause for regret, when you look back at what farmers hoped to accomplish with the co-op idea more than 80 years ago,” said Brett Fairbairn, a historian at the University of Saskatchewan.
Pool officials say the restructuring is essential for the company’s future viability.
In order to gain much-needed access to equity markets, they said, the various classes of shares must be consolidated to provide equal rights for all shareholders.
But they also acknowledge that it may not sit well with everybody.
“We’re an organization with a history almost as long as the province, so of course people will feel strongly about it,” said pool president Terry Baker.
“I don’t think SWP has ever made a major decision that didn’t cause a great deal of angst.”
The pool says it is staying true to its co-op roots by creating a new member-based co-operative that will enable farmers to provide business advice to the pool and serve on the company’s board of directors.
As far as Schmidt is concerned, the changes being proposed would be well received by the pool’s pioneer members.
“I think it’s entirely consistent with the forward-thinking farmers that began the company and seized the opportunity that was there in the 1920s,” he said. “Now it’s vital that we do the same thing.”
Schmidt said that by taking action now, the pool will avoid being forced into certain actions in 2008, under the restructuring deal reached with creditors in January 2003, when the company teetered on the brink of bankruptcy.
As part of that complex financing arrangement, the pool would have had to pay $285 million in principal and interest on some $173 million in convertible notes,
“We’ve simply taken charge of the process and by doing the earlier conversion we will eliminate the need to pay the $285 million,” said Schmidt.
Converting the $173 million in notes into shares should remove a major impediment to the pool’s share price, which has ranged between 30 and 50 cents over the past year. The notes are structured in such a way as to put an effective ceiling of 45 cents on the share price, and every time notes are converted, that puts more shares on the market, diluting share values.
Schmidt said the new share structure should eventually bring new resources to the pool.
“From conversations we’ve had across the country, there is substantial interest in participating in the company, but people don’t bring money when they have no ability to affect the company,” he said.
Under the plan, which requires approval from pool delegates, shareholders and note holders, the pool will be governed by the federal Business Corporations Act rather than the provincial Saskatchewan Wheat Pool Act, which would eventually be repealed.
