OMAHA, Neb. - Minnesota-based AgStar Financial Services announced a proposal Wednesday to merge with Farm Credit Services of America.

Last month, Farm Credit Services' board accepted an acquisition offer from Rabobank, a Dutch banking cooperative and agricultural lender.

Rabobank's proposal has met with concerns from some borrower-stockholders in the Farm Credit Services cooperative, who must approve the deal, and from people familiar with the federal Farm Credit system, which is geared toward agricultural lending.

Sens. Tim Johnson and Tom Daschle of South Dakota are calling for hearings on the Rabobank proposal. Based in Omaha, Farm Credit Services serves farmers and ranchers in Nebraska, Iowa, South Dakota and Wyoming.

AgStar is part of the federal Farm Credit system. Under its proposal, borrowers in Farm Credit Services would continue to own and control the company, AgStar said. They also would receive a cash distribution of $650 million.

Separate from the cash distribution, borrower-stockholders in Farm Credit Services also would receive dividends each year, AgStar said. AgStar has used that system since 1998.

Rabobank is offering $600 million to farmers and ranchers who use Farm Credit Services. Rabobank also would pay an $800 million exit fee to leave the federal Farm Credit system.

The Farm Credit Administration, which oversees the Farm Credit System's banks, associations and service corporations, must approve Farm Credit Services' request to leave the system. Among other things, the agency must consider whether letting a member leave would hurt the remaining institutions.

Johnson and Daschle said the proposed sale has created "confusion, uncertainty and skepticism" for South Dakota farmers served by the lending cooperative. They called for public hearings on the sale before the Senate banking and agriculture committees in September.

"I don't think we know enough about the ramifications of this purchase at this point," Johnson said.

Farm Credit Services of America said it will issue a report in November outlining the deal in detail.

The cooperative's 51,000 stockholders _ 10,000 in South Dakota _ will have a month to analyze the report before voting on the sale in December.

Farm Credit Services is following a government-imposed process and cannot issue its full report until November, said spokeswoman Michelle Ford.

After providing that information to shareholders, it "would welcome the public hearings," she said.

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