Farmland, Cenex Bid For Merger
Voted Down By Latter's Members

KANSAS CITY, Mo. —(AP)— Members of Cenex Harvest States rejected a proposed merger with Farmland Industries Inc. that would have been the biggest merger of farm cooperatives ever.

Members of Farmland approved the consolidation with 89 percent in favor, but the proposal got only 64 percent of the vote from Cenex members, short of the two-thirds approval needed.

The two co-ops have nearly one million farmer-members. They own extensive crop supply, grain handling and processing, petroleum refining and meatpacking operations in the Midwest.

H.D. ``Harry'' Cleberg, president of Farmland, said the vote proved that Farmland understood what its members wanted. He said he was disappointed that the Cenex vote fell just short.

``We're disappointed because farmers, who would be the real beneficiaries of consolidation, won't be able to share in the economic benefits as soon as we had hoped,'' Cleberg said. ``They need every bit of economic help they can get at this point and this would have helped in this area.''

Cenex Harvest States CEO Noel Estenson said his company would take time to analyze the vote and concerns raised by its members before deciding how to proceed.

Cleberg noted the majority of voters approved the merger.

``The objective now is to explore the ones who didn't feel the consolidation was in their best interest to see the real reasons and then arrive at the best solution,'' Cleberg said.

The companies' leaders had said the merger was necessary to compete with agriculture's bigger investor-owned corporations, such as Cargill Inc. and Archer-Daniels-Midland Co. They also promised $500 million in savings.

Cleberg reiterated Tuesday that he believed the merger would benefit both companies' market competitiveness and economic performance.

``Many of the outsiders we brought in to help on it said they hadn't seen a consolidation that made this much sense in a long time,'' Cleberg said.

Opponents said the merger was designed to rescue Farmland from a precarious financial situation. Members of both cooperatives also have objected to multimillion-dollar merger payments to officers of the two co-ops. Several farmers' unions have suggested farmers would be hurt by the merger.

The companies already have an alliance in the sales, distribution and marketing of petroleum and related products and another joint venture involving pet-food manufacturing.

They had tried to merge in late 1988, but called off the plans six months later.

Farmland reported 1998 revenues of $8.8 billion in all 50 states and 90 countries. Including Farmland's share of the sales of its affiliated businesses, sales totaled $11.9 billion.

Farmland's business lines include crop production and crop protection products, livestock feeds, petroleum, grain processing and marketing, and the processing and marketing of pork and beef products.

Cenex is a cooperative system owned by farmers, ranchers and local co-ops spanning from the United States to Canada. Last year, Cenex reported revenue of $8 billion.

Cenex operates oil refineries and pipelines and provides products and services ranging from grain marketing to food processing.

Cenex, in the fiscal year ended Aug. 31, earned $86 million, down from $177 million the previous year, on sales of $6.3 billion.

Cenex, which reported its annual earnings Tuesday, said economic distress on the farm and a wet spring contributed to the earnings decline.