ESOP plans in agriculture too

Employee Share Ownership Plans in Canada are often thought to work best in industries such as engineering, construction, high-tech, and famous little airline companies like the one based out of Calgary, AB.  Any guesses?

As our economy changes and international border rules tighten, employee ownership is also becoming more popular in agriculture.  Traditionally, most of our agricultural products in western Canada were shipped south into the US, without  any processing.  Live beef, hogs, and sheep were shipped across the border by the truckloads.  Cereals and oilseeds were sent by the trainloads as the raw product. We’re finally catching on to the fact that it can be more efficient, effective, and profitable to ship finished products, where the value-adding occurs in Canada, employing Canadians.

Many of the western Canadian agricultural companies were started as co-ops and many continue to operate successfully under that structure.  Succession of the business is reasonably simple as new members voluntarily join and older members sell their membership shares.

However, for an existing corporate business wanting to transition ownership, the co-op model involving the employees doesn’t usually fit, because of the one member; one vote principle which is fundamental to a co-op.  This would mean that an entrepreneur who has the greatest stake in the business, would share equal voting power with employee members who have very little invested in the business.

The ESOP model usually works much more effectively. It allows the owner(s) to sell their shares to the employees over a period of time, while maintaining a controlling interest, and ensuring the values and culture are maintained for the long-term.

Hi-Pro Feeds is an excellent example. Originally incorporated as a producer co-op in 1946 in Edmonton, AB, it served farmers in the area by providing a market for their grains as well as processed feeds for their animals and for surrounding feeding facilities. As the business grew and six Canadian mills were added, corporate changes occurred as well.  In the late 60’s mills in the US were added, providing facilities from Sherwood Park, AB to Friona, Texas.

As an ESOP, over 70% of Hi-Pro Feeds employees are shareholders and there is a deep history of employee dedication and commitment to the business.  This dedication is further enhanced by the very recent acquisition by Hi-Pro Feeds (in early November, 2015) of Champion Feeds Services.  This deal expands Hi-Pro by adding the feed mills and Hi-Pro-Sherwood Parkretail operations in Westlock, Barrhead, and Grande Prairie, AB.  It also includes the oat processing facility in Grande Prairie, which will expand opportunities to ship value-added oat products to markets in Texas, Oklahoma, New Mexico, and Arizona.

The ESOP can be a great fit, anywhere there is a dedication to providing value to stakeholders, which includes the employees who ensure the operation continues and thrives.

Leave a Reply

Your email address will not be published. Required fields are marked *