Company signs five-year lease, option to buy 50% stake.
The agreement, which runs through Dec. 31, 2022, was signed April 4 and announced on April 10. The current 10-year lease will remain in effect until the end of 2017.
Golden Growers Cooperative, Fargo, North Dakota, U.S., owns 49% of ProGold in partnership with American Crystal, which has 51% ownership. ProGold owns a corn wet milling plant near Wahpeton that produces high-fructose corn syrup, corn gluten feed and corn gluten meal as well as corn germ that is sold for production of corn oil. The plant has been leased to Cargill under 10-year agreements since 1997, and Cargill operates the plant and markets all of its products. Golden Growers, formed in 1994, has about 1,600 members. ProGold has operated as a subsidiary of American Crystal since 2003.
“The evolution of the corn wet milling industry was an important aspect of our discussions,” said Mark Harless, chairman of Golden Growers. “We believe this lease is a reasonable bargain for the near term. It also holds out a possibility of a long-term future for the ProGold plant.”
The base rent under the new five-year agreement is $17 million for 2018 and 2019, $16 million for 2020, $15.5 million for 2021 and 2022 and $14 million for 2023, which is an optional sixth year, according to the Form 8-K filing with the U.S. Securities and Exchange Commission. ProGold agreed to fund a minimum $750,000 for infrastructure maintenance for each year of the lease. ProGold also may be required to pay for certain capital improvements.
If Cargill exercises the option to buy, Golden Growers would purchase the remaining 1% from American Crystal to become a 50% owner of ProGold with Cargill.
Golden Growers and Cargill have agreed to a general framework for a future partnership, with a detailed agreement to be completed prior to the time when Cargill exercises its option.
According to the Form 8-K filing, Golden Growers, Cargill and American Crystal entered into an agreement related to the lease of the ProGold plant, ProGold and Cargill entered in a second amended and restated facility lease that includes rent amounts and other details, and Cargill and American Crystal entered into an option agreement under which Cargill can purchases 50% interest in ProGold from American Crystal.