Bid for Wrightson opens door in China

The offer is planned to close on April 15. Photo / File photo

China-based agricultural company Agria has begun a takeover bid for PGG Wrightson, targeting opportunities in China.

Shareholders yesterday were sent details of the 60c a share partial takeover offer made by Agria Corporation - already a shareholder of PGG Wrightson - in partnership with Chinese company New Hope Group.

Agria chief executive Xie Tao has said the takeover would give PGG Wrightson a committed cornerstone shareholder with the capacity to leverage the New Zealand company's product and service offering to access opportunities in the Chinese market.

The offer is conditional on holding 50.01 per cent of the voting rights and has been made by Agria (Singapore) Pte, which would be jointly owned.

In a letter to shareholders yesterday Tao said Pyne Gould Corporation had agreed to sell its 18.3 per cent stake into the offer through a pre-bid agreement, which when taken with Agria's existing 19.01 per cent holding in PGG Wrightson represented about 37.3 per cent of total shares.

PGG Wrightson had underperformed, including a recent profit downgrade, he said. "In our view, PGG Wrightson's business requires restructuring and a refocus on the core businesses of AgriServices and AgriTech to achieve full potential."

Agria supported in principle a strategy to review the divestment of the PGG Wrightson Finance book.

PGG Wrightson last month cut its earnings outlook for the year ending June 30 to a net profit of $15 million to $18 million, compared with $23.3 million the previous year. Shares closed down 1c yesterday at 52c, having traded at 48c before news of the planned takeover bid.

The 60c a share offer for 235 million shares was worth about $141 million and valued PGG Wrightson at $454.8 million. If the offer was successful PGG Wrightson would remain a New Zealand-based listed company with a board led by independent chairman Sir John Anderson, Tao said.

Forsyth Barr analyst John Cairns said the offer was a reasonable premium over the previous sale price.

"But I guess you've got to put it into context that the stock is trading at pretty depressed levels," Cairns said.

Several elements had conspired to make conditions hard for the firm.

"The company's had a number of issues ... with the deleveraging of the sector, the on-farm expenditure despite positive commodity prices has been depressed," he said. "And also the uncertainty in respect of farm values."

Forsyth Barr saw longer-term value in the company "most probably north of 70c but it's going to be interesting to see what the independent appraisal report has to say about this", he said.

PGG Wrightson said the board reiterated advice that shareholders might want to wait to decide whether to sell their shares until they have read the target company statement, which would be published on February 7.

The statement would include a formal recommendation from the board and commentary from independent adviser Grant Samuel.

The offer, conditional on consent from the Overseas Investment Office and Chinese regulatory authorities, is planned to close on April 15.

PGG Wrightson said to ensure shareholders had all relevant information it would bring forward its interim results announcement for the half-year ending December 31 to February 7.