11TH ANNUAL FARMER COOPERATIVES CONFERENCE
UNIVERSITY OF WISCONSIN
CENTER FOR COOPERATIVES
Cooperative Strategy, Structure
and Finance
November 18-19, 2008
Michael L. Weaver, Chair
Agribusiness and Energy Group
Lindquist & Vennum P.L.L.P.
Minneapolis, Minnesota
612-371-3987
mweaver@lindquist.com
1
11th Annual Farmer Cooperatives Conference
Perspectives on Cooperative Finance
Michael L. Weaver
SETTING THE STAGE
Unprecedented Volatility in Commodity
Prices (input costs!)
Dramatic Increases in Working Capital
Requirements
Financial Markets Crisis
Risk Assessment of Biofuels Industries
Bankruptcy Filings
2
11th Annual Farmer Cooperatives Conference
Perspectives on Cooperative Finance
Michael L. Weaver
COOPERATIVE MODEL
Non-profit Marketing Association:
grade, process, ship, market
Net proceeds less expenses
Principal/agent relationship vs.
buyer/seller relationship
Marketing agreement/Bylaws are key
documents
Losses constitute “overpayment” on
delivered product
3
11th Annual Farmer Cooperatives Conference
Perspectives on Cooperative Finance
Michael L. Weaver
COOPERATIVE MODEL – cont.
Supply Cooperative Association
Losses constitute “instant” patronage
dividends
Asset Evaluation
Pursue Growth Opportunities
Cash is King
4
11th Annual Farmer Cooperatives Conference
Perspectives on Cooperative Finance
Michael L. Weaver
COOPERATIVES – BACK TO THE
BASICS
Equity Primer
Wall Street vs. Farm Operations
$300 per acre/$250 per head
Tools for Cooperative Boards
Pricing (“at-cost” operations)
Loss Financing
Efficiency
Balanced Dividend/Revolvement Policies
Nonqualified Unit Retains
5
11th Annual Farmer Cooperatives Conference
Perspectives on Cooperative Finance
Michael L. Weaver
COOPERATIVES: BACK TO THE
BASICS
Assets owned collectively to Supply or
Market Products of Farmers
Ownership Based on Patronage (“Need”)
Democratic Principles
Deeper Equity Pool
Stronger Balance Sheet
Cooperatives: Back in Vogue (or never left!)
6
11th Annual Farmer Cooperatives Conference
Perspectives on Cooperative Finance
Michael L. Weaver
COOPERATIVES: THOUGHTS
TO STRENGTHEN
What Can We Do?
Strengthen Agency Principles in Subch. T.
(Bot case)
Extend Securities’ Exemptions
Direct USDA Loans/Investment into
Qualifying Cooperatives
Expand Sec. 1042(g) concept to Asset Sales
to Qualifying Cooperatives (e.g. “1031”
concept)
7
11th Annual Farmer Cooperatives Conference
Perspectives on Cooperative Finance
Michael L. Weaver
190+ attorneys, offices in Minneapolis and Denver
Corporate Finance Group, representing both private and public
companies in equity and debt financing transactions
Mergers & Acquisitions Group, assisting clients buy and sell
companies in industry groups
Agribusiness and Energy Group, representing cooperatives and
businesses in the agricultural, food processing, manufacturing, and
energy industries
Formation, financing, and construction or acquisition of processing
and manufacturing facilities is core competency
Our clients have been instrumental in biofuels industry, as well as
wind energy, livestock, and cooperative services industries
We assist companies with governance, strategic planning, and
financing, and are recognized nationally for our tax planning work
with cooperatives
8
Michael L. Weaver
Lindquist & Vennum PLLP
4200 IDS Center
80 South Eighth Street
Minneapolis, MN 55402
(612) 371-3987
mweaver@lindquist.com
9