Unique understanding of F&A
Extensive teamwork
Enabling change
vertically into the supply chain,' says Ben Davies,
Head of the F&A Relationship Management
team of Rl in London. 'But they had virtually
no capital or effective means of capturing their
natural cash flows and could therefore not
borrow any money of significance to work
with processors or successfully acquire assets
of their own.'
Ground-breaking solutions
The Rabobank team proposed to restructure
the business radically by creating the first
modern European type co-op in the UK. A new
constitution was designed which provided the
mechanisms to retain capital, borrow, and act
as a 'margin organizer', adjusting the milk prices
paid to its members in accordance with its
obligations (for instance re-payment of debt).
'This model enabled them to capitalize the
business, gave them a modern governance
structure (including a voting system), and creat-
ed a platform from which they could borrow
money and therefore invest,' Davies explains.
As the dairy industry was consolidating, a series
of acquisitions followed. These transactions have
been financed through a variety of innovative
structures created and provided by Rabobank
and which are also unique in the UK experience.
In the final major step in its transformation, Milk
Link acquired one of the UK's second largest
cheese processing business in April 2004. In
doing so, the co-op became the third largest
dairy processor in the country with the ability
to process 80% of its members' milk.
'The essence of our successful relationship with
Milk Link is our unique understanding of the dairy industry and of
co-operatives', says Davies. 'In less than three years the company
has made six acquisitions including three joint ventures. It has
totally transformed itself; a demanding program by any standards
that has created an array of complex financing and other chal-
lenges. While it has certainly not been easy, there is no doubt in
my mind that no other bank in our market could have delivered
this for Milk Link.'
Delivering these solutions has required a huge team effort involv-
ing Relationship Management, Product Specialists, Credit, Legal,
Loan Syndications, Capital Markets, and Structured Commodity
Finance CPRM. Davies notes, 'There are too many to mention
them all but, in particular, thecontributions ofGerard van Empel
and RIAS as well as Berend du Pon and the London Leverage
Finance team have been totally invaluable in making all this
happen and ensuring the high profitability of the relationship'.
'What stands out to me about this case is the ability of the bank to
blend our unique knowledge base with top class financing skills in
a truly innovative way that our competitors simply cannot match.
In doing so, we have moved beyond simply facilitating a cliënt
solution to being a genuine catalyst and agent of change,' says
Davies. The wider evidence of this is visible in the UK market today
as other co-ops are actively trying to replicate what Milk Link have
done which, in turn, is accelerating the rationalization of the sector.
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