Competition wants to derail Rabobank’s U.S. acquisition

Purchase of Farm Credit Services

OMAHA, Nebraska - The proposed acquisition of co-operative bank Farm Credit Services of America by Dutch cooperative banking group Rabobank has come under fire from farmers and Mid West area politicians. This summer, Rabo-bank and FCSA signed a $600 million deal for the sale of the Nebraska-based bank.

The bank, which operates in three adjoining states as well, was part of the national Farm Credit System until the agreement with Rabobank. Other small cooperative farmers banks within the group fear a loss of independence when the System starts to break up and financial institutions pound on the individual parts.

The farmers cooperatives now opposing the Rabo-bank deal, are hoping that a ‘white knight’ will outbid the Dutchbank and keep the Nebraska-based FCSA within the farming community. AgStar Financial Services reportedly is willing to make an offer. The farmers cooperatives also have sollicited the help of South Dakota Senators Daschle and Johnson, who have written letters of concern to FCA Chair Nancy Pellett and Senate Agriculture Committee Chairman Thad Cochran, requesting that hearings be held regarding Rabobank’s acquisition of Farm Credit Services of America.

Cycles

Some of the questions raised are whether the new entity created by the sale would offer, as proposed, a wide range of products and services to producers. The farmers are concerned if these will match the needs of smaller operations or younger producers entering the farm business. Also questioned is the possibility of a growing gap in providing venture capital for producers in the four-state region trying to compete in global markets by seeking value-added opportunities and developing niche markets.

Nebraska farmers wonder if the Dutch bank will hang with them through the up-and-down cycles of agriculture. The mission of the Farm Credit System is to serve farmers’ ongoing, long-term credit needs. Farmers and Farm Bureau are concerned this mission could be compromised if Farm Credit Services is bought by Rabobank.

Rabobank has an estimated 9 million customers in 35 countries. The Dutch bank and FCSA say they are committed to U.S. agriculture and that Rabobank has a long track record in financing farmers around the world. The two companies are prevented by federal regulations to answer the questions. Rabobank has stated however that its bid is ‘fair’ and will not be raised in the light of a possible AgStar’s offer.

A full-service commercial bank, Rabobank started out in Dutch agricultural society as a purely credit co-operative more than a hundred years ago. The name Rabobank dates from the 1970s when the northern Dutch Raiffeisenbank merged with the southern Dutch Boerenleenbank. Its head office is located in Utrecht.

In the U.S., Rabobank has a number of agribusiness subsidiaries. They include Valley Independent Bank (in California) which deals with retail banking, commercial and agribusiness services; RaboAg Services, agricultural operations financing, and Rabo Agri-finance, real estate and agricultural lending.