The qualities that helped Craig Norgate reshape New Zealand's rural landscape have contributed to his undoing, writes Owen Hembry
The first time former Federated Farmers president Charlie Pedersen met Craig Norgate he tried hard not to like him - and failed.
It was 1996 and Norgate, then the chief executive of Kiwi Co-operative Dairies, had set his sights on Tui dairy, of which Pedersen was a supplier.
Norgate made a fairly aggressive takeover bid and Pedersen was at a meeting to hear him speak. The insight Pedersen gained into Norgate's vision changed his mind. "I stopped voting against the merger and voted for it," he says.
"[The merger] wasn't very popular with the Tui suppliers at the time but it kind of caught the company with its pants down and made them an offer in the end they couldn't refuse."
Norgate's bold move on Tui perhaps typifies his career, with his part in molding the dairy industry into heavyweight Fonterra and consolidating the rural services industry into PGG Wrightson.
But in the face of the global economic meltdown it is also a style that arguably led PGG Wrightson into a financial crisis and this week saw receivers appointed to Norgate vehicle Rural Portfolio Investments.
It is estimated nearly $1 billion of investor wealth has been wiped out in the past two years in rural companies associated with Norgate, with one key business partner losing more than $60 million.
And yet despite the massive losses it is hard to find criticism of Norgate not tempered by a good word about him.
Norgate was propelled into the wider public gaze in 2001 when he became the first chief executive of Fonterra with a well-publicised big salary - he was the first million dollar man - and big ideas.
He combined his natural charm and what's been described as a computer-like brain to run the multi-billion dollar global business.
Pedersen was an inaugural member of the Shareholders' Council and recalls that under Norgate Fonterra forged alliances, including with Nestle and American dairy co-operatives.
"He'd come up with an idea and people would go, 'Jesus why didn't someone think of that before'," he says.
Norgate is not quite charismatic, Pedersen says, but has a formidable intellect and a great gut instinct about where to gain an advantage.
"In fact in the dairy industry I'd be bold enough to say, now a bit of time's gone under the bridge, that he outgunned and outflanked almost the whole of the rest of the industry."
Des Hunt, Shareholders Association corporate liaison director, describes Norgate as an entrepreneur.
"I think his strength is that he's got vision and ideas and he sees the big picture," Hunt said.
"You need those sort of people but they do need people who can bring them into line when they get it wrong" he says. "What tends to happen is that if they don't have that support they can make a big one."
For Norgate the big one was a failed merger attempt in 2008 between PGG Wrightson, of which he was chairman, and meat processor co-operative Silver Fern Farms.
PGG Wrightson defaulted on an unconditional offer to buy half of Silver Fern for $220 million and last year had to write off $49.6 million to cover settlement and due diligence costs.
In June the company notified its banking syndicate of a potential breach of its financial covenants and was given waivers.
Furious shareholders mauled directors at its annual meeting in October and the company later released details of a capital injection package worth $249.4 million, including selling a stake to Chinese agricultural business Agria, a rights issue and a placement of convertible redeemable notes.
Hunt says PGG Wrightson took an unacceptable risk. "You don't do those deals without dotting the i's and crossing the t's," he says.
One prominent businessman, who does not wish to be named, says Norgate is a good thinker and good a getting deals done.
"I think Craig's weakness ... is that he's much better at doing deals than he is at managing businesses," he says.
"He had a lot to contribute but I think the ego and personality got in the way of good sense too often and that's a big flaw and he needs very, very strong people around him to draw the line between when the energy and ego's out of control, and to make it clear and also to curb that."
It is always important to have a bit of conservatism alongside the vision, he says.
"I think that's what they lost sight of and Craig, being the aggressive deal doer that he is, was always looking for bigger and bolder rather than consolidating some pieces and saying we better get some of this right before we go on the next stage in order that we can preserve the positions that we've built."
Business sector veteran Sir Selwyn Cushing describes Norgate as a visionary. "I have respect for him, I have no criticism personally of him, I enjoyed working with him," Cushing says.
In 2005, Norgate's Rural Portfolio Investments owned a 50.1 per cent controlling stake in Wrightson and was making a takeover bid for rival rural services company Williams & Kettle.
"My son David and I had 35 per cent holding in Williams & Kettle and of course we held the key to whether he got his way or not."
Eventually 96 per cent of shareholders decided to go for Norgate's offer, with an independent report saying the cash bid was 50c a share higher than it should be, Cushing says.
Cushing became a board member of Wrightson and now sits as an independent director on the board of PGG Wrightson.
"He had reputation and very, very importantly money from banks was relatively easy compared with today," Cushing says.
Issues in the US sub-prime mortgage lending market grew into a full blown global economic crisis during 2008, hammering financial markets, stock exchanges and ultimately the entire world.
"If you do what Craig was seeking I think you could have reasonably high gearing [debt] but when you struck a bad patch like he did with Silver Fern ... a total depression, if you are highly geared - need I tell you what the result is," Cushing says.
Norgate, 45, does not see himself as an entrepreneur. "No, first and foremost I'm an accountant," he says.
"I guess I've just always challenged the status quo in terms of trying to find better ways of doing things.
"To the extent that that means you identify opportunities and are prepared to make a decision, with say 80 per cent of the information to drive things forward, then you take risks and you get labelled an entrepreneur."
Norgate takes care to explain that PGG Wrightson had secured its bank financing for the Silver Fern deal, with part of the plan to also undertake a capital raising by issuing shares.
"You can almost always raise equity, the only question is the price but we had a situation where equity markets were effectively closed."
PGG Wrightson agreed to bring the equity raising date forward to coincide with the settlement date which got the deal stuck on one day - something Norgate admits was a mistake.
"That date happened to be the day that [the US] Congress turned down the bloody rescue package."
The company waited for Silver Fern's farmers to approve the deal before undertaking the capital raising, because if they voted no the company did not need to do it, he says.
In the end the capital raising did not generate enough money and the company got the balance underwritten by South Canterbury Finance.
The underwriting was not part of the original agreement and needed new approval by the banks because that portion of the funds would not be available until some weeks later, Norgate says.
"They didn't approve that because nobody's going to approve anything on that day."
The equity that had been raised had to be returned because it was conditional on the settlement taking place and so the deal fell over.
The failure of the Silver Fern Farms deal is a tragedy, Norgate says.
"To have farmers in that industry vote to actually share 50 per cent of their company with a corporation was jumping 20 years."
This week, Trustees Executors appointed receivers to the secured assets of Norgate investment vehicle Rural Portfolio Investments (RPI) and its financing arm Rural Portfolio Capital.
RPI was a joint venture between Norgate and Otago's McConnon family set up in 2003 with the aim of investing in Wrightson and as a vehicle for other agribusiness investments.
Norgate says the failed Silver Fern Farms deal had been laid to rest and was not the cause of the demise of Rural Portfolio Investments, with PGG Wrightson's share price back up to about $1.50.
"It really is the two things caused by the economic environment that have caused the problem and one of those was the fall off in earnings as credit for farmers got really tight in the last quarter of last financial year and that combined with the fact banks were trying to get every organisation to de-leverage meant that [PGG Wrightson] was forced to do a pretty debilitating capital raising."
PGG Wrightson's share price closed down 2c yesterday at 52c compared to a 12-month high of $1.48.
John Roadley, Norgate's first chairman at Fonterra, says "He's got a brain as big as Ben-Hur and his head works like a bloody computer."
"He understood the magnitude of the job and he put his hand up but that's part of his nature, he's a very optimistic individual," Roadley said.
"The country should be celebrating people like that rather than wanting to dance on their grave, they should be feeling sorry that something like this has happened to the sort of person that New Zealand desperately needs."
Norgate could have pulled it off but the timing was unfortunate, Roadley says. "The nay sayers will say that it was just too far out on the risky side of it but entrepreneurs do that, they take calculated risks and they take a punt and more people should like to see them win."
"If we had 1000 people like that the country would be a bloody sight better off than it is."
Roadley describes himself as more of a conservative-natured person.
"So I guess I'd say that he [Norgate] probably hangs out on the risky side more than I would personally do but I admire him for having that sort of an attitude."
People get carried along by Norgate with his infectious enthusiasm, he says. "I guess that that sort of personality sometimes has to be tempered with reality and I thought that the McConnons would have played a good role in that."
"That leads me to believe that rather than being too risky that with their timing with the world calamity which nobody saw coming was just a piece of rotten bad luck."
The McConnons provided the initial $40 million investment in the Rural Portfolio group, followed by more capital to a total of $60.2 million - an investment now lost.
Despite the lost investment Baird McConnon says the relationship with Norgate remains close.
"The vision that we had was, I thought, a very good vision and it's just bad luck really that we tried to apply it in a world that had gone pretty bad on us," McConnon says.
McConnon suspects predictions are correct that Norgate will look overseas to continue his career but says it would be a loss to New Zealand.
"The guy's got so much ability and he's young enough to clearly rise again," McConnon says.
"In truth at the point where the world started crumbling beneath our feet we were sitting there with a $3 [PGG Wrightson] share price versus a 50c one today," he says. "So there were obviously a lot of other believers there at the same time."
With the benefit of hindsight and the knowledge the world would go into a meltdown McConnon says he would have done things differently.
"I guess not having a crystal ball to see that coming at us I'll regret for the rest of my life really but that's the cards we were played."
