Fitch sees smooth sailing for United Suppliers-Land O’Lakes merger

Fitch sees stable outlook for the merger of United Suppliers and Land O’Lakes.
Fitch sees stable outlook for the merger of United Suppliers and Land O’Lakes. | Courtesy of
Fitch Ratings said recently that the merger between United Suppliers and Land O’Lakes is neutral to modestly positive, based on the current ratings for Land O’Lakes.

The long-term Issuer Default Ratings (IDR) for Land O’Lakes are BBB-. The current Rating Outlook is stable.

Fitch forecasts a two-step merger process. The first step will combine the crop and seed-protection businesses from the two companies, then the companies will unite their crop-nutrient businesses as sales restrictions are unveiled during the coming years. Both companies require owner and member votes by August 2015. Fitch anticipates that the transaction will be finalized by October 2015.

For Land O’Lakes, the ratings factor in equity financing for the transaction does not include material incremental long-term cash or debt payments. United has the transaction risks of higher combined seasonal working capital borrowings, as well as a higher member-payout structure. These factors will be partially offset due to potential cost synergies, especially when it comes to procurement. Additionally, revenue synergies taken from crop nutrients and cross-selling crop inputs will most likely offset these risks.

Fitch doesn’t predict that the merger will impact the existing Land O’Lakes payouts to equity holders, as holders will be paid based on their co-op business generation.

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United Suppliers, Inc

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