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A decision by PGG Wrightson to fund its investment into a new wool company venture through equity rather than debt will be welcomed by farmers, says Meat & Wool New Zealand chairman Mike Petersen.
Details of the structure of the business, called The Wool Company, emerged yesterday at its official launch in Wellington. The business which has been launched to bring profitability back to the wool industry will see PGW sell its wool business into The Wool Company for $37.5 million, lower than the projected price of $46 million.
That price will be paid for by the way of $10 million of ordinary shares, $17.5m in convertible preference shares and $10 million in cash initially giving PGG Wrightson a 50 per cent equity stake in the new business. The other half of the business will be owned by Wool Grower Holdings - an entity which farmers will be asked to buy into.
Petersen said it had been thought the PGG Wrightson side of the deal would be funded by debt through a capital note issue. "There was a perception out there that Craig [PGG Wrightson chairman Craig Norgate] was selling assets into the Wool Company. Now Craig has got equity, it's not seen as selling out.
"In the minds of farmers, that will make a big difference," he said.
PGG Wrightson's stake in the business is expected to reduce as other wool businesses become part of the venture but initially it will have a 40 per cent voting right while Wool Grower Holdings will have 60 per cent.
Yesterday Wool Grower Holdings chairman John Periam said he expected to have prospectuses out before Christmas.
