LAKOTA, Iowa — By a 2-1 margin, Midwest Grain Processors, LLC (MGP) stakeholders late last month approved a $100 million landmark bid by a Brisbane, Australia-based company to buy a 60 percent share in the Lakota, Iowa ethanol producer.

“The outlook for the farmer owners is tremendously bright,” MGP board chair Dave Nelson said. “They will receive nice checks in the mail in the next few months, and we will then look forward to communicating with our members about new opportunities.”

In a 717-348 vote, Global Ethanol Holdings Pty. Ltd. said they would pay MGP shareholders $3.23 a share. The 1,065 votes represented almost 83 percent of the cooperative’s nearly 1,300 farmer members in 10 Midwestern states.

Nelson said the company plans to nearly triple the 100 million-gallon ethanol plant in Lakota and the 57 million-gallon plant currently under construction at Riga, Mich.; MGP is also pursuing the construction of a 100 million-gallon ethanol plant in Illinois.

But while the landmark deal marks the first time foreign investors have bought controlling interest in an Iowa farmer-owned ethanol plant, some MGP shareholders expressed concern about the hastiness of the sale as well as losing local control.

“I’m not sure the board appreciates that,” said Buffalo Center, Iowa farmer and MGP farmer-owner Gary Garst. “I’m very reluctant to give up local control.”

Lennon Brandt, a Swea City, Iowa farmer and MGP shareholder, said this other side of the story about the sale hasn’t been told in the major media - especially since the deal wasn’t exactly on the table.

“This was a sale that was perpetrated by the management and the chairman of the board to push this thing through in a very fast and a very hurried manner before the investors could really evaluate what was the true worth of this company,” Brandt said.

The sale, Brandt said, was designed to be completed quickly for MGP’s benefit, while giving MGP’s 1,287 shareholders little time to consider the long-term implications.

“I think it was sold for way under value,” Brandt said. “The way they had this set up was nobody knew what to think about the terms of the sale, which the board said: “Well, we had to bring it forward” because if somebody offers them money, they figured they better present it with it.”

From start to finish, Brandt said when he tried to get a membership list, it took him 17 days.

“By the time I got the voter list, it was Saturday the 18th (of March),” Brandt said. “They’ve been working on their side since August (2005), generating the business plan – where they were going, what they were going to do.

“Than, all of the sudden, it’s plunked in the farmers’ lap just a few days before they’re supposed to start voting and then ‘boom’ it’s all done.”

Brandt said some of his fellow shareholders who ended up supporting the sale still had great reservations about their votes.

“There were a lot of uneasy feelings from people who even voted ‘yes,’” Brandt said. “Some still went ahead and signed ‘yes’ on there but they were trying to trust the board. But I did not like that MGP and Coltivare had physical control of the ballots for a week.”

Brandt said he also questioned the management’s use of former MGP employees who now form Coltivare, a Minneapolis-based consulting firm who were paid $2.5 million to push the sale forward. With the sale, however, Nelson said MGP farmer-investors have an opportunity to continue to grow their investment in the ethanol business with Global Ethanol.

“It is a win for the farmers, a win for the company and a win for Global Ethanol,” Nelson said. “It is also very good news for the Midwest. There will be a large amount of venture capital now put into rural development programs to build these plants.”

In 2005, however, Brandt said MGP’s shareholder dividends were smaller because most Iowa ethanol plants were paying almost four times more than MGP.

“They basically can buy us with a lot of our own money,” Brandt said of Global Ethanol. “If there’s $10 million in dividends sitting there for this year and $50 million next year, why would you sell a company that’s generating that type of a profit for this cheap a dollar? It’s just ridiculous.”

Brandt added that Global Ethanol shouldn’t be blamed for wanting to harvest MGP at a very cheap price, despite the hurriedness of the sale.

“Since other ethanol plants are making so much more money than this one ever paid out dividend-wise, some just thought maybe they would just take that money and go put it into some place else,” he said.

As the nation’s renewable fuels production leader, Iowa currently has 21 ethanol refineries with the capacity to produce nearly 1.3 billion gallons annually.

In addition, 11 ethanol refineries and a major expansion are under construction with a combined annual capacity of more than 500 million gallons.

This farm news was published in the April 26, 2006 issue of Farm World.