PGW not worried about investor's issues

Wrightson chairman Keith Smith. Photo / Glenn Jeffrey

PGG Wrightson says it's not concerned that new Chinese investor Agria is facing a class action lawsuit in the United States and is late with filing its latest accounts because of two internal investigations.

New Zealand's largest rural services provider announced on Friday that Agria, a New York Stock Exchange-listed agricultural business, would buy a 13 per cent stake for $36 million with the potential to bump it up further in the future.

Debt-laden Wrightson plans to use the money to help pay back a $200 million bill due in March and is also considering other options to raise money, with the company expected to reveal details of a rights issue early next month.

But background searches of Agria have revealed it is facing a number of issues of its own.

It listed in November 2007 raising US$282 million ($378 million) in an initial public offer worth US$16.50 per share. But its share price fell 27 per cent soon after.

Investors took another hit only five months later when the company revealed its chief operating officer had resigned mid-way through talks over a US$18 million compensation deal designed to ensure he stayed with the company. At the same time Agria warned its auditors were having trouble gaining access to the accounts and the company withdrew its fourth quarter forecast.

The share price plummeted another 38 per cent.

That prompted the launch of a class action law suit claiming the company had misrepresented and misled investors in its prospectus documents for the IPO.

In June this year Agria confirmed it would not be filing its annual report on time because of allegations made by a former employee relating to the number of sheep bought and the price paid by Agria's affiliated company, Primalights III Agricultural Development Company.

Yesterday Wrightson chairman Keith Smith said it was aware of the two matters and was confident they would be resolved without any impact on the agreements between itself and Agria.

Smith said Agria was vigorously defending the allegations over its IPO and a motion to dismiss the action was heard in July and was pending a decision by the judge.

PGW had also been told by Agria's board that it was working on filing its annual report with all urgency.

"PGG Wrightson's due diligence on Agria included full disclosure. The fact that the relationship has progressed to the point of announcement demonstrates that neither PGG Wrightson, Agria nor their advisers found issues of significant concern."

Smith was backed by Wrightson's major shareholders.

Sam Maling, chairman of Pyne Gould Corporation, which has a 21 per cent stake in PGW, said he was not worried about Agria's background.

"As presently advised we don't have any concerns," he said.

But some in the market were less convinced of the positive impact Agria could have for shareholders: "You go around the world and that is the best company you can get? It's rubbish. The only thing they bring is money. It doesn't make PGW any more attractive as an investment and doesn't resolve any issues," one commentator said.

Wrightson's share price closed up 1c at 79c yesterday.

AGRIA'S CHEQUERED PAST

* October 16 - deal with PGG Wrightson announced
* September 14 - Agria appoints new chief executive and chief financial officer and announces plans to restructure
* June 25 - Agria says it will file its annual report late because of two internal investigations
* March 19 - chief financial officer resigns
* November 24, 2008 - chief executive officer resigns
* April 11, 2008 - class action lawsuit filed
* April 8, 2008. Agria's share price drops 38 per cent to US$5.46
* April 7, 2008 - chief operating officer resigns and company reveals it has been in prolonged compensation talks with the COO and executive to pay out US$18 million in cash and shares to ensure they stay with the company. Auditor says it cannot begin audit and warns annual report may be filed late and withdraws its forecast.
* November 6, 2007 - Agria lists at US$16.50 a share after an initial public offer raises US$282 million but the share price falls 27 per cent soon after listing