Wrightson, Silver Fern settle

Eion Garden and Craig Norgate were much happier in June last year when they announced the merger deal. Photo / Simon Baker

The dust has settled on the failed merger between PGG Wrightson and Silver Fern Farms, care of an agreement made possible with funding from South Canterbury Finance.

Wrightson will pay Silver Fern $25 million and issue 10 million ordinary shares to it.

They rank equally with existing shares and are fully paid. It had paid $5 million previously, of which $3.5 million was for costs incurred by Silver Fern. The settlement is full and final.

"This is a sensible and pragmatic 'NZ Inc' outcome," said Silver Fern chairman Eion Garden.

Timaru-based businessman Allan Hubbard was involved in the settlement. "These are two iconic agri-business companies whose importance to the New Zealand economy cannot be under-estimated," he said.

South Canterbury Finance provided a facility of up to $25 million of subordinated debt to Wrightson. It has the right to convert all or part of the amount drawn down to Wrightson shares within 90 days at a strike price of $1.50 a share. The shares were trading at $1.20 yesterday.

Hubbard is chairman of South Canterbury Finance, which was founded in 1926 and provides finance to businesses, farmers and consumers. In February, South Canterbury raised $100 million in a sale of bonds. It is covered by the Government's retail deposit guarantee scheme.

South Canterbury Finance said it had proper security for its advance.

"South Canterbury has assisted the mediated settlement that will allow both parties to avoid a wasteful legal dispute and concentrate on generating more wealth for their stakeholders and New Zealand," said Hubbard.

The funding is separate to $475 million of bank facilities Wrightson has through ANZ, BNZ and Westpac, which was announced in February. Under this package, $125 million has to be paid down by December 2010 through cashflow, working capital initiatives and the sale of non-core assets.

Wrightson chairman Craig Norgate said the companies could put last year's events behind them.

Wrightson defaulted on an offer to buy a 50 per cent shareholding in Silver Fern for $220 million, when it could not come up with the $145 million first instalment earlier in the global financial crisis.

Silver Fern also yesterday reported a net loss of $5.9 million for the six months ended February 28 on revenues of $1.002 billion.

Chief executive Keith Cooper said the results would have been similar to last year if adjusted for currency mark-to-market and timing of sales' volumes.

Inventories stood at $383.3 million from $289.6 million last year.

Garden said Silver Fern was evaluating capital raising options, including a share issue. "We are looking forward to an improved second half of the year," he said.

- NZPA