Alto members approve sale
to Saputo Cheese USA
By Dan Campbell, editor
lto Dairy
Cooperative,
operated as a
farmer-owned
cooperative in
Wisconsin for 114 years, has
announced that its members have
approved the sale of its assets to
Saputo Cheese USA Inc. in a deal
worth $160 million. The
transaction, which was
unanimously approved by Alto
Dairy’s board in January, was
approved by 98 percent of the
cooperative’s members from
across Wisconsin and the Upper
Peninsula of Michigan. They
voted during a special meeting in
Fond du Lac, Wis., on Feb. 27.
“Although it is hard to see an
end to the cooperative form of
business at Alto, our board is
pleased that we were able to
provide an economic return to
our members for their investment
and loyalty to the cooperative,”
said Howard Zellmer, Alto’s board
chairman.
The $160 million from Saputo is reportedly about 40
percent above the market value for the co-op’s assets, and
means members will get their full equity from the co-op.
Saputo will be paying each former co-op member a premium
for continuing to ship to its plants.
Robert Cropp, professor emeritus with the University of
Wisconsin Center for Cooperatives, said the sale of the co-op
comes “as a real disappointment” to proponents of farmer
ownership of value-added facilities. He said he hopes the sale
of Alto Dairy will “serve as a wake-up call” to the Upper
Midwest dairy industry about the need to address some of the
serious structural challenges facing it.
The overall challenge is: How can the Upper Midwest
better compete with the growing dairy industry in the West
and Southwest? Dairy industry growth in the West is being
fueled by investments in new plants
and the lower cost of procuring
milk. Cropp blames “a rather
irrational milk-pricing system,
which requires payment of
unjustified premiums” to producers
in the Upper Midwest for further
tilting the market in the direction
of the West.
Another major challenge, Cropp
says, is for the Upper Midwest
dairy industry to invest more in
facilities that produce value-added
cheeses and that process dairy whey
into high-protein food ingredients,
as is occurring in the West. He
thinks such an effort might best be
pursued as a joint venture by the
region’s remaining dairy co-ops.
The roots of the sale go back to
the fall of 2006, when the Alto
board of directors and management
began looking at ways to accelerate
the co-op’s strategic plan. “As part
of this process, the offer from
Saputo surfaced,” Alto spokesperson
Karen Endres said. “It was our
obligation to bring this offer
forward to our members.”
“Alto Dairy’s members overwhelmingly supported the sale
of assets to Saputo Cheese USA Inc.,” Rich Scheuerman,
Alto’s president and chief executive officer, said in the co-op’s
announcement of the sale. In it, he called the sale a “historic
day for the cooperative,” adding that “the sale will strengthen
the business by improving the long-term viability of our
manufacturing facilities, providing job stability and a longterm
purchaser of milk for dairy producers in Wisconsin.”
Alto’s cheese plant near Waupun, Wis., is the largest and
newest cheese plant in the state. The co-op also owned a
cheese plant at Black Creek, Wis.
Alto had annual sales of $378 million in 2007, with a profit
of $5 million. However, Cropp said it lost money in four out
of the past six years, and has had difficulty with timely
redeeming of member equity for several years.
The large vote in favor of the sale is
probably an indication both of the co-op’s
stressed financial situation and the fact
that Saputo “made a very sweet offer,”
Cropp said. Some earlier management
decisions hurt the co-op, including a
money-losing venture with a partner in
Texas to produce ingredients for the pizza
industry, as well as a very competitive
operating environment, Cropp said.
New management was brought in
about four years ago, and major costcutting
steps were taken, including a 25-
percent reduction in labor expenses and moves into higher
value-added cheese products. But such steps apparently were
not enough.
On the bright side, the deal does show that Saputo
believes in the continued viability of the Wisconsin cheese
market, Cropp noted. Saputo also recently bought a Land O’
Lakes cheese plant in California.
All employees will be offered employment by Saputo,
including all management, with the exception of the CEO,
said Endres, adding that the co-op’s field-service team and
state-certified labs will also be maintained
and acquired by Saputo.
“Our members were never required
to sign contracts (they could leave on any
day) and they won’t be required going
forward,” said Endres. “Dairy producers
in the state have many options of where to
ship milk. These options include
cooperatives and proprietary operations.”
“All equity holders in the business,
including current and past milk shippers,
will receive 100 percent of their equity
shortly after the transaction closes,” she
said. “There are additional payments to active shipping
members, based on their patronage to the cooperative.”
Saputo is one of the top 20 dairy processors in the world,
the largest dairy processor in Canada and is among the top
five cheese producers in the United States.
Challenges facing the Upper Midwest dairy industry,
including the sale of Alto, will be among the topics addressed
April 2-3 during the Minnesota-Wisconsin Dairy Policy
Conference and the Dairy Directors’ Leadership Conference
in La Crosse, Wis.
Ed Schafer takes reins at USDA
Ed Schafer was sworn in as the 29th Secretary of the U.S.
Department of Agriculture (USDA) on January 28. Schafer
brings a record as an
innovative, two-term governor
of North Dakota to USDA along
with extensive private-sector
experience as both an
entrepreneur and a business
executive.
Schafer served as North
Dakota’s governor from 1992 to
2000 and made diversifying and
expanding North Dakota’s
economy, reducing the cost of
government and advancing
agriculture his top priorities in
office. He worked to normalize
trading relations with China and
develop that nation as an export market for North Dakota farm
products. Schafer led efforts to upgrade North Dakota’s
communications infrastructure and make high-speed voice
and data networks available to farmers, ranchers and rural
businesses.
To expand the state’s job base, he encouraged the growth
of value-added agricultural industries such as pasta and cornsweetener
manufacturing. As chair of the Western Governors
Association, Schafer led regional efforts to demonstrate how
technology could improve the efficiency and lower the cost of
delivering government services such as health benefits and
food stamps. He also worked to make telemedicine more
available and affordable in rural areas.
Schafer co-founded and co-chaired the Governors
Biotechnology Partnership to increase public understanding
and support for the benefits of agricultural biotechnology.
He has had a lifelong interest in conservation, helping to
arrange the USDA Forest Service’s purchase last year of the
5,200-acre Elkhorn Ranch in North Dakota — where Theodore
Roosevelt had a home and operated a cattle ranch in the 1880s.
Born and raised in Bismarck, N.D., Schafer graduated from
the University of North Dakota in 1969 with a bachelor’s degree
in Business Administration and earned an MBA from the
University of Denver in 1970. Secretary Schafer’s grandfather
immigrated to North Dakota from Denmark and homesteaded
land in Hettinger County that he turned into a wheat and
livestock farm. Schafer spent summers there while growing
up. He helped his uncles with chores, tinkered with engines
and learned firsthand about agriculture.
Before entering public life, Schafer was an executive with
the Gold Seal Co. in Bismarck, a consumer products
marketer.
