|Daniel Knutson, senior vice president and chief financial officer of Land 'O Lakes, Inc. of Arden Hills, MN notified the U.S. Securities and Exchange Commission in a report dated January 27, 2006 that it had purchased the minority interest in MoArk, LLC from Osborne Investments, LLC for $71 million in cash. The transaction increases Land 'O Lakes' ownership in MoArk, an entity engaged in the production and marketing of eggs and egg products, from 57.5% to 100%.
According to the report:
The Company indicated that the purpose of the transaction was to consolidate control of MoArk as it continues the process of repositioning this business. The purchase essentially accelerates the exit of Osborne from the business by one year. As previously disclosed, Osborne held a put option on the Moark interest, exercisable in March 2007. The option was exercisable at a base price of $42 million plus an additional amount related to market conditions. The present value of the minimum purchase price had been recorded on the Company's balance sheet in Other Liabilities. The current transaction cancels that option and eliminates the Company's obligations to Osborne.
Prior to closing this transaction, the Company amended its Five Year Revolving Credit Agreement to allow for the continued treatment of MoArk as an Unrestricted Subsidiary under that agreement. This Amendment permits MoArk to continue to maintain its own separate financing, which is not guaranteed by the Company.
Motivation for the buy-out is unknown but the subject of intense local speculation. MoArk with headquarters in Chesterfield, MO had been accused of animal cruelty and degrading the environment by concerned citizens in the Southwest Missouri community of Neosho where MoArk's largest egg-producing farms are located.