From Private to Public: The Gold Kist Odyssey
It wasn’t easy. Nobody said it would be. The odyssey taking Atlanta-based Gold Kist Inc. to a new level in its history was not without thought, however. The campaign began last spring when the company raised $200 million in a bond issue to refinance senior credit facilities and repay certain term-loans.
“After this success and much deliberation and discussion, the board of directors finally agreed to go ahead with the conversion and public offering of stock,” recalls John Bekkers, chief executive officer. In the following months, he visited 105 investors.
“Investors were interested in the cyclical nature of the industry, our future goals, and revenue growth plans,” Bekkers reports. Gold Kist sold 13.6-million shares at $11 each. The ownership ratio reflects 27-percent by outside investors and 73 percent owned by former cooperative equity holders.
“Producers, employees, and the public have a stake in the company now,” Bekkers emphasizes. “This is a positive advantage because for the first time employees can own company stock.”
The payoff for the cooperative amounts to more than $500 million in cash and stocks available for distribution to current and former members of the cooperative. Moreover, the change enhanced the company’s ability to raise money.
“People who wanted cash got it, and those who wanted stocks got it,” Bekkers points out. “But, we are not a different company now that we are public. We have the same core values and goals concerning our suppliers and customers. We want to create long-term value for stockholders. We can’t live for quarterly earnings.”
Predictably, uncertainty shadowed the move given the company’s longstanding history as a farmer-owned cooperative, whose members valued the benefits of their patronage arrangements. Ultimately, the vote to approve conversion and IPO represented 96.4 percent of the 2,300 eligible voters, of whom 90 percent actually cast a vote. “We had a good buy-in by the cooperative members,” Bekkers notes. “The key to success is that we went to every member of the cooperative and explained the situation, listened to their concerns, and answered their questions honestly.”
Gold Kist, known as the Cotton Producers Association (CPA) until the ‘70s, started in 1933 fulfilling the dream of D.W. Brooks, then a young agronomy instructor at the University of Georgia. The farm cooperative thrived in the ensuing decades with members receiving market prices for their products, and paying competitive market prices for goods and services purchased from Gold Kist. Besides individual profits, farmers received a share of the cooperative’s profits.
Gold Kist distributed patronage refunds based on the company’s financial performance during the fiscal year.
Over the years, Gold Kist reinvented itself by investing in poultry, catfish, hogs, peanuts and pecans, farm supplies, feed, seed, fertilizer, and chemicals. In the 1990s, economies of scale became the critical defense against sluggish agricultural-commodity values on a global basis.
Market forces triggered other cost-saving measures of which Gold Kist was not immune. The business downsized and restructured resulting in the sale or closing of certain farm supply stores, and later the divestiture of non-core businesses including its agronomy operations and peanut and aquaculture divisions. In addition to the poultry operations, Gold Kist retained ownership in a small pork operation, which includes 20,000 sows. It furnishes feeder pigs to farmers who produce hogs for marketing through the company. Other farmers raise pigs provided by Gold Kist for its joint venture with Land O’Lakes Inc., a Midwest regional farm cooperative that finishes, processes, and markets them.
Gold Kist now moves to a different phase of its business evolution as a public company. As Bekkers notes, Gold Kist is a true public company based on its ownership makeup. “There is no one single family, person, or entity with the majority holdings,” he says. “This is truly a company of one share and one vote.” NP