Zions First National Bank has offered to purchase 320,000 shares or 32.5 percent of the Class A voting common stock of the Federal Agricultural Mortgage Corp., nicknamed Farmer Mac, for $2.56 million.
The Farmer Mac board of directors has agreed in principle to accept the offer at $8 per share, which is a 60 percent premium over the current market price for the stock. The deal is subject to Farmer Mac management's satisfaction with the final terms and the negotiation and execution of appropriate legal documentation.The bank's offer will expire April 10 if the transaction isn't closed by then. W. David Hemingway, Zions' executive vice president, will seek a position on the Farmer Mac board.
Hemingway said the bank does quite a bit of agricultural-based lending and has been involved with Farmer Mac almost since its inception. He said the offer to purchase shares in the company is a natural extension of the bank's existing business.
Farmer Mac was created by Congress in 1988 to establish a secondary market for agricultural real estate and rural housing mortgage loans, and to facilitate capital market funding for U.S. Department of Agriculture guaranteed farm program and rural development loans.
Hemingway said the original legislation contained errors that kept the program from growing, but those were corrected when President Clinton signed a reform law last month.
Under the new legislation, Farmer Mac is authorized to issue guaranteed securities backed by qualified mortgage purchased directly from originating lenders and to guarantee securities backed by pools of qualified mortgages formed by certified poolers.
Zions currently owns 2,000 shares of Farmer Mac Class A voting common stock and has participated in the Farmer Mac program for five years.
Henry Endelman, president and chief executive officer of Farmer Mac, said, "The transaction provides an important increase in capital toward the higher level mandated by the new legislation. The offer is a clear vote of confidence in Farmer Mac's future by a significant agricultural lender and capital markets participant."