MORTON — B.C. Rogers Poultry Inc. and B.C. Rogers Processors Inc., which together represent the second largest private employer in the state with 3,400 employees, have recently become 100% employee owned.
“It is a novel concept to have a poultry facility totally owned by employees,” said Mike McAlpin, president, Mississippi Poultry Association. “All of what was B.C. Rogers Poultry has come under the ESOP (employee stock ownership plan) and is actually owned by the employees. With prices in the poultry industry the way they are now, that may have actually saved that company. Just like every other broiler company in the U.S., B.C. Rogers has been in a money-losing situation recently because of historically-low prices.”
McAlpin said the advantage of the transition to being 100% employee owned is that it puts the company on firmer financial footing. He said it gives lenders more confidence in the company, and it helps insure employees of continuing employment.
“It keeps them from looking over their shoulders and wondering if they will come in one day and see the plant gate locked, and no one working anymore,” McAlpin said. “I hope this will end up being win-win for employees, company and the growers, and I anticipate that it will be.”
McAlpin said all agriculture is cyclical, and downturns have to be expected. Right now the poultry market is saturated in part because of a downturn in exports. Mississippi had relied heavily on large poultry exports to Russia that have largely disappeared due to an economic downturn in the Russian economy.
“The upside to that is that it has forced us to look at other markets,” McAlpin. “You learn a very valuable lesson. If you get so attached to one market and it goes south on you, you’re in a world of hurt. That market has slowly come back a little bit, and we are looking at Middle Eastern, Far Eastern and European markets that we didn’t try as hard for before because we had the Russian market so locked up.”
B.C. Rogers Poultry, which had about $326 million in sales in 1999, has been in business for 69 years. It is the eighth largest private company in the state in terms of annual sales. It markets portion-controlled chicken to the food service industry.
The ESOPs were established for 3,400 employees to purchase the companies’ stock from shareholders John M. Rogers Sr. and J. Kelley Williams, who had owned the companies since 1981.
The company buyout was led by company executives including Ramon Arias, president and CEO; Tito Echiburu, treasurer and CFO; Willis Lecroy, director of finance; and a team of outside advisers. It took eight months to close the deal.
“Working together, this group accomplished what many felt was impossible,” Echiburu said.
Under an ESOP, employees of the company own the stock of a company, which is held in a trust for their benefit. Experts say one advantage of an ESOP is that it encourages employee loyalty and dedication. Since the employees own the company, they have a greater vested interest in making it efficient and profitable.
“The quality of our products and their popularity in the marketplace can only be enhanced by employee ownership,” Arias said. “A wide body of research indicates that employees who are also owners are substantially more productive and innovative, which makes the future exciting for everyone — the company, new employee-owners and the community.”
Arias said that each year as the loan is repaid, the ESOP trustee will allocate company stock to the accounts of individuals who have been employed full time for at least one year. He said all of the company’s 3,400 employees will be eligible for inclusion in the plan without cost when they have completed one year’s employment.
As employees accumulate seniority with the company, they acquire an increasing right to the shares in their account. When an employee leaves the company or retires, the trust repurchases his shares, providing cash for the employee’s retirement.
Arias said that company executives are delighted at the opportunity to preserve local ownership through the ESOP at a time when mergers and absentee ownership are becoming the norm. He said the company plans to conduct business as usual, continuing to expand its current product lines with an emphasis on building upon its present markets.
According to The ESOP Association, several features make ESOPs unique as compared to other employee benefit plans. First, only an ESOP is required by law to invest primarily in the securities of the sponsoring employer. Second, an ESOP is unique among qualified employee benefit plans in its ability to borrow money. As a result, “leveraged ESOPs” may be used as a technique of corporate finance.
The ESOP Association says in a leveraged ESOP, the ESOP or its corporate sponsor borrows money from a bank or other qualified lender. The company usually gives the lender a guarantee that it will make contributions to the trust which enable the trust to amortize the loan on schedule; or, if the lender prefers, the company may borrow directly and make a loan back to the ESOP. If the leveraging is being used to buy out the stock of a retiring owner, the ESOP will acquire those existing shares.
There are approximately 10,000 ESOPs in the U.S. with 10 million employee owners. This represents 10% of the American workforce. Approximately 500 ESOP companies are 100% owned by the employees. In 1994, U.S. ESOPs owned $222 billion in corporate assets.
ESOPs have become increasingly popular in the U.S. growing from 200 in 1974 to 10,000 today.
Contact MBJ staff writer Becky Gillette at email@example.com.