Walnut Growers Vote to Go Public

Members of Stockton-based Diamond Walnut Growers voted overwhelmingly Friday to turn their cooperative into a public company that would be better positioned to push more of their product into foods such as cookies and salads.

The 80% approval by the 1,735-member farmer cooperative came despite opposition from some growers who feared that converting to a stockholder-owned corporation would weaken the organization’s commitment to their interests.

“We are gratified by the high level of grower support,” said Michael Mendes, Diamond’s president and chief executive. He declined to elaborate, citing Securities and Exchange Commission regulations involving stock offerings.

Diamond executives said the conversion to a publicly traded company -- named Diamond Foods Inc. -- would raise the capital they need to pay debt, upgrade processing plants and develop and advertise new lines of snack nuts and other products for their Diamond of California brand.

A conversion by 93-year-old Diamond, the sixth-largest agricultural cooperative in California, would be only the second such move by a growers’ group in the state. In 2002, 1,600 avocado growers voted to turn their cooperative into a company called Calavo Growers Inc., which trades on Nasdaq.

The shift to a corporate structure is a logical transition for fast-growing Diamond, said Patrick Berends, a professor of agricultural business management at Cal State Chico.

“If you want to get bigger, going public is the best way of doing that,” he said. “You need to go beyond your grower base to get capital.”

Diamond, which controls 45% of the country’s walnut production, increased its purchases of walnuts by 65% to 297,000 tons from 1997 to 2004. Sales jumped by more than 50% to $360 million in the same period.

Grower Frank DeBenedetti of Linden in San Joaquin County said he was surprised and disappointed by the vote. “We could have explored other possibilities,” he said.

Diamond plans to sell to the public 5.3 million shares of common stock at about $15 a share. The organization declined to say when the offering would be launched.

Diamond co-op members can elect to receive stock, cash or a combination of the two, with the total amount each receives based on the quantity of walnuts that the grower sells to the co-op.