Valley Wide Co-op / Ag Link Inc. Merger

This past year, Valley Agronomics acquired a four-location fertilizer company (Saddle Mountain Supply) in Central Washington. With that purchase, we gained hundreds of new members. We planned to eventually provide those members with fuel, lubricants, propane, and services out of our current Pasco energy office. Well, the purchase of SMS got the attention of the leadership at Ag Link Inc., a co-op who operates just to the NW of our new territory. Since our relationship with Ag Link goes back many years, it was only natural to discuss how we might work closer together now that we were “neighbors.”

Ag Link is a producer’s cooperative, much like ours. They were officially formed as a result of a merger in 2006. They are made up of three local co-ops whose history goes back over 70 years. Through their seven locations, they serve the grain growers in their market with fertilizers, chemicals, energy products, and a limited hardware business. They currently have over 1,200 members.

They offer primarily Energy and Agronomy products through seven locations. Total sales in 2020 were $95 million with approximately $20 million coming from Agronomy and $75 million in energy. They have a fleet of transport trucks that support their energy business as well. Valley Wide total sales in 2020 were $500 million.

Very much so. A company’s financial condition can be measured in several ways. Typically, we look at their debt, their working capital and earnings over the past 3-5 years, and the earnings potential going forward. Ag Link has very little debt – neither long-term nor seasonal. They have operated their company with sound fiscal controls and the financial statements reflect that. Their current ratio is 2.6:1, which indicates they are very solvent. Earnings have been consistently 2-3%. Going forward, VWC can bring value in our purchasing power that will add to the bottom line – which as a unified company, helps us all.

Other financial considerations go beyond the audited results. We consider the condition of the facilities, equipment, and most importantly, the customer base as important measures when analyzing a business’s value. Their facilities and equipment are in very good condition. As a co-op, their customer base is made up of loyal producers who have demonstrated their commitment to the co-op system through consistent and growing support of Ag Link Inc.

As I mentioned above, our goal is to serve our new customer base in central Washington with fuel, lubricants, and propane. Since Ag Link is currently in that business, they can provide much-needed management, facilities, trucks, and equipment to service those customers and eliminate the need for Valley Wide to duplicate what already exists. This also has the potential to make Ag Link more efficient with their people, processes, and equipment. We can accomplish more working together as one, than apart.

This merger also gives VWC access to new customer markets, both rural, agricultural, and commercial, where we can market our propane and other energy products. The Spokane valley to the east provides that opportunity.

Changes will be almost non-existent for legacy Valley Wide customers, given that the new territory is in NE Washington. Our members in the Columbia Basin will see some changes in the form of fuel, lubricants, and propane products and services becoming available – that’s a good thing. Ag Link has a very good team of people in place, so we won’t see any changes that would put additional burden on the employees of Valley Wide. However, our team at VWC will provide greatly needed help to the Ag Link employee group and look forward to the collaboration as one team to meet the needs of growers.

I firmly believe that anytime a company can add a loyal customer base to its current base of customers it makes them stronger. The fact that Ag Link serves those customers with the same product lines that VWC currently offers through good facilities and a dedicated employee team adds to that strength.

As the CEO, I tend not to look at things in the rear-view mirror. I focus more on the potential that lies in front of us. Adding Ag Link offers us very little (if any) risk and great potential.

Valley Wide is an aggregate of several, smaller cooperatives. Combining those smaller co-ops under one name and operating as a single entity has been critical to our financial success. That’s the whole premise of a cooperative organization – to accomplish together what you cannot as an individual. At what point can we say, “we’ve arrived?” I believe that as long as there are cooperative organizations like ours that have a desire to survive and continue to provide products and services to their members under the cooperative structure, they will have a seat at the table of discussion with Valley Wide.

Adding Ag Link onto our current customer base in central Washington will create a need for a separate District, so those members have representation. Currently, VWC has three districts covering eastern Oregon, western Idaho, south-central Idaho, Eastern Idaho, and northern Utah. Our plan is to bring on three Ag Link board members to the current nine members of Valley Wide, for a total of 12. Those three directors will represent the new district.

Of course! A thorough review of their financials has been done by both the CEO and CFO of Valley Wide. Further studies will be done to examine the potential business improvements, growth, and margin enhancements resulting from the combined companies. There is little in the way of synergies since their territory is adjacent to ours and not overlapping. There are financial benefits in our new purchasing power for the members of Ag Link, and labor savings in the energy business as a result of us not having to replicate management and equipment to service our market.