U.S. AgBank and CoBank, two of the five banks in the Farm Credit System, have announced they intend to pursue a merger in 2011. The banks’ boards of directors executed a Letter of Intent that sets forth key terms and conditions of the proposed transaction, which also requires regulatory and stockholder approval.
The merged bank would serve as a wholesale provider of financing to Farm Credit associations that provide credit and financial services to more than 70,000 farmers, ranchers and other rural borrowers in 23 states. It would also serve as a direct lender to agribusinesses and rural electric, water and communications service providers throughout the country.
The merged bank would continue to do business under the CoBank name and be headquartered outside Denver, CO, but it would maintain U.S. AgBank’s existing presence and operations in Wichita, KS, and Sacramento, CA. Robert B. Engel, CoBank’s president and CEO, would be the chief executive of the combined entity.
"Over the course of the past year, the U.S. AgBank board has engaged in a strategic review of our business to determine the course that would best serve our associations and the farmers and ranchers in our territory for the long term," says John Eisenhut, chairman of U.S. AgBank. "Throughout that very deliberate process, we have followed the guiding principle that we will pursue the solution that best positions our customers to continue receiving reliable credit at a reasonable and competitive cost. The AgBank board has determined that a merger with CoBank best achieves that principle, and we look forward to working closely with CoBank as we move to the next steps in the merger review and approval process."
"We’re extremely pleased to be pursuing this transaction, which offers significant benefits to the customer-owners of both organizations," says Everett Dobrinski, chairman of CoBank. "The merger will bring together two financially sound, profitable banks to create an even stronger cooperative financial services institution, under a governance structure that will offer associations, cooperatives and other customer-owners a fair and equitable voice in the governance process. Our two boards are strongly aligned around the merits of the merger, which we believe significantly enhances the banks’ ability to fulfill their mission of service to rural America."
The merger proposal will also need to be presented to and approved by stockholders of the two banks. If stockholders endorse the transaction, the merger is expected to close on October 1, 2011.