Deerfield Ag Services becomes employee-owned company

Deerfield Ag Services has transitioned to employee ownership, a move company leaders said will preserve its independence and keep the business rooted in the local community.

The Deerfield-based agricultural supplier became an employee-owned company Feb. 1 through an Employee Stock Ownership Plan, or ESOP.

In a letter to customers, the Wallbrowns, the family who founded the company, said the decision was driven by long-term planning and a desire to remain independent.

“At a time when consolidation is common in our industry, we felt led to remain independent, locally focused, and rooted in the communities we serve,” the letter stated.

At the beginning of the process, the company worked with the Ohio Employee Ownership Center at Kent State University to understand the process and how it would work for employees.

“We had to jump through a lot of hoops,” said Bill Wallbrown, second-generation owner.

Wallbrown said the company hired an outside firm to guide it through the process. The new structure allows employees who work at least 1,000 hours per year to participate. Those employees become beneficial owners through shares held in a trust.

Under the Deerfield plan, the company was sold to a sub-trust, which holds the shares on behalf of employees. Over time, the company repays the Wallbrown family, who hold the note for the purchase. The ESOP functions as a qualified retirement plan, similar to a 401(k), but employees do not have to contribute their own money.

“They become beneficial owners in shares of the company,” Wallbrown said. “If our people stay in this, by the time they retire, they will have a good nest egg at their disposal.”
Shares are awarded each year as part of the company’s annual compensation plan and are apportioned based on salary. Employees accumulate shares over their careers and become vested over time.

Michael Palmieri, associate director of Kent’s Ohio Employee Ownership Center, said ESOPs are structured as retirement plans that invest in the company itself.

He said employees do not purchase shares with their own income.

“The workers technically own the company now,” Palmieri said, “but they didn't pay for the company out of their own pockets.”

As the loan to finance the deal is repaid, shares are released to employees and placed into their accounts.

“As that loan is paid back, the shares that were purchased in the original transaction … will be released and given to the employees,” he said.

Palmieri said employees receive shares over time through a set allocation formula applied across the organization.

“The formula that's used to figure out how much stock each person gets each year is the same for everyone in the company,” Palmieri said.

He said the structure can serve as a long-term wealth-building tool for employees.

“For that reason, you have a very, very powerful wealth-generating tool,” Palmieri said.

Palmieri said employee-owned companies also tend to show different patterns during economic downturns.

“They tend to, on average, have better company performance … higher sales, stronger job growth,” he said.

He added that employee-owned companies also tend to be less likely to reduce their workforce.

Founded in 1959 by Boyd and Joan Wallbrown, Deerfield Ag Services has served farmers in Portage County and surrounding communities by providing agronomy, grain, feed and energy services.

In the letter to customers, company leaders said the decision followed several years of succession planning and due diligence.

The goal, the letter stated, was to ensure the long-term strength, independence and stability of the company.

“From the beginning, our priorities were clear,” the Wallbrowns wrote to customers. “First, to honor God in our decisions; second, to do what was best for our families, our employees, and our customers.”

The company said pricing, contracts and services will not change as a result of the transition.

Bill Wallbrown said reaction from customers and the community has been positive.

“We’ve had very positive reactions from the community and our customers. They’re very happy with the decision,” he said.

Wallbrown said he and John Wallbrown will remain actively involved during a transition period and continue to support the company’s future.