KEY POINTS:
PGG Wrightson could net about $13 million from this month's float of NZ Farming Systems Uruguay, says chairman Craig Norgate.
NZ Farming Systems was created by 10.6 per cent shareholder PGG Wrightson to utilise New Zealand dairy farming expertise in Uruguay.
NZ Farming Systems made an initial public offering last December and has so far raised $169.6 million from issuing shares at $1 each. The company plans to raise at least another $50 million this month to expand its South American operations by issuing shares at $1.50 and floating on the NZX.
PGG Wrightson holds 17 million shares and the fund and farm manager contracts for the company.
According to last year's prospectus, the manager was entitled to a performance fee calculated at 20 per cent of the amount by which share price growth plus gross distributions exceed 10 per cent per annum compounded. An adjustment would ensure that total performance fees paid over time were not enhanced by share price volatility. PGG Wrightson would also be entitled to a management fee equivalent to 1.5 per cent of the gross asset value each year, reducing to 1 per cent after June 30 next year.
"We get a base fee but the real potential for PGG Wrightson is if the business is performing and we're triggering that [performance fee]," Norgate said.
The performance payout was calculated on the share price for the last quarter of the year, which was April to June, he said.
"We shouldn't get ahead of ourselves but if this thing is successful and then say that averages $1.50, I think the number's close to $13 million."
The performance return would make for a good year at PGG Wrightson, which made a net profit last year of $27 million, Norgate said.
"Then of course the hurdle's that much higher, so if it was $1.50 then it's got to be above $1.65 a year later so you don't get a windfall like that every year," he said. "The reality is that those investors [who] put money in a year ago probably don't begrudge us that because they've certainly done well."
NZ Farming Systems has acquired 30,980ha in Uruguay and has said it could expand to 50,000ha at around the current price for land.
The closing date for the capital raising was expected to be about December 14, with an NZX market listing following on December 18.
