Ginseng NZ sale raises issues over industry's future

The sale of Ginseng NZ highlights the difficulties in assessing less traditional horticultural investments.

Ginseng is a herb renowned for its healing qualities but the experiences of a Bay of Plenty-based ginseng-growing venture have not always been so soothing.

A failed attempt to sell Ginseng NZ is the latest development in the convoluted, multimillion-dollar saga surrounding the business.

The recent tender came after the company was put into receivership in December by shareholder and Money Managers founder Doug Somers-Edgar, who with his wife is listed on the Companies Office website as owning just under 46 per cent.

The sales flop - plus a cluster of conflicting claims about the operation - highlights the potential difficulties for investors in assessing less traditional horticultural investments.

Ginseng NZ, operating on more than 160 hectares, is described as New Zealand's biggest commercial ginseng-growing operation to date.

The herb is used widely in health and cosmetic applications, particularly in Asia, and Ginseng NZ's produce has been projected to achieve solid prices.

But, before the receivership and sales failure, Ginseng NZ had several problems: Ex-managing director Brian Sage was ousted from the operation last year, and a special partnership offering involving some of the crop was pulled last year following differences of opinion involving Sage.

Somers-Edgar, whose Money Managers is one of the country's biggest financial planning and investment advisers, said he now planned to keep running the business to try to get back $17 million worth of equity and loans he said he had put in.

"At the moment it's very much a matter of having one foot on the boat and the other one on the jetty and hoping that nobody unties the rope."

He said Ginseng NZ's shares had no value now.

But Sage, whose family is listed as owning 43 per cent of Ginseng NZ, insisted the business is worth at least $49 million based on plant numbers and infrastructure.

He claimed the receivership was not valid because it was based on an outdated debenture, and had sought legal advice on several other issues he was looking at taking further.

Sage also said Somers-Edgar had tried to claim more than $10 million from his family trust to repay Ginseng NZ debt.

But Somers-Edgar insisted the debenture was not outdated. He said his claim for money was against the company, and documents had been served on Sage in his capacity as director.

At one stage, Sage suggested he wanted to be back running Ginseng NZ but had also said he was willing to sell his stake.

Somers-Edgar said he would not try to buy Sage's shareholding given that he felt it had no value.

Last year's prospectus for the Clean Green Ginseng special partnership - based around crop planted at Tirau between Hamilton and Rotorua - was designed to raise about $12 million.

Sage claimed the offering was withdrawn in August - shortly after he had been ousted as managing director and from the board in an internal dispute - because he was unhappy with the way the business was being run. Sage said Somers-Edgar had never explicitly said why he was ousted.

Somers-Edgar claimed Sage failed to show up for directors' meetings, and said the Clean Green Ginseng offering was pulled because of conflict with Sage. People who put money into the special partnership got it back with interest, he said, while all Ginseng NZ creditors had been paid.

Sage supplied a document offering Ginseng NZ for sale in the recent tender. It suggested its crop could yield $525,000 a hectare, or more than $85 million.

This was based on a targeted sale price of five-to-six-year-old ginseng in three to five years of $350/kg.

Sage claimed total earnings could be as high as $120 million or more. He estimated the Ginseng NZ operation could easily achieve a $65 million surplus on an $85 million yield, depending on the method of marketing.

But Somers-Edgar believed the surplus would be less than half that, with much of it due to be repaid to him.

The Clean Green Ginseng investment statement also set the expected sale price of dried ginseng root planted in 2003 at $350/kg on harvest in 2010.

It said Ginseng NZ research had found dried ginseng root commonly traded at $US350/kg ($557/kg), while "prime" dried ginseng root had been sold at more than $US800/kg. "As an organic product, we believe the special partnership's ginseng roots could sell at the higher end of the price range."

Herald columnist Brian Gaynor noted last year that cultivated ginseng produced in a farm environment under artificial shade did not realise much more than $US55/kg.

Somers-Edgar suggested Ginseng NZ's crop was "wild-simulated", which is known to fetch higher prices.

Sage said wild-simulated - ginseng deliberately grown in more natural conditions - is perceived in the market as being closer to "pure" wild ginseng, described as virtually extinct.

But Sage said Ginseng NZ's crop was cultivated organically, which meant it would get at least $350/kg and as much as $500/kg.

"$350/kg will be easily achieved so long as organic certification is obtained and the crop marketed is six years old," said Sage. Failure to achieve such certification would mean a greatly reduced return.

Mal Singh, managing director of Ginseng Growers, which is now running the Ginseng NZ operation, said the ginseng was not organic.

But he said whether the ginseng was wild-simulated or organic made no difference to the fact that $350/kg was achievable because of confidential plans being developed for processing the ginseng.

Meanwhile, Graeme Parmenter, who heads Crop & Food Research's ginseng programme, saw potential for wild-simulated ginseng to be grown under pine forest cover in New Zealand.