Agria Corporation, the new cornerstone shareholder in farm service and supply company PGG Wrightson, considered investment in other New Zealand companies before cementing a deal on Friday.

Beijing-based PricewaterhouseCoopers (PWC) associate director John Layburn said Agria had been involved in discussions with a number of companies over the last two years – essentially since it listed on the New York Stock Exchange in November 2007.

“PGW is the one we chose,” he said.

He refused to say which other companies were considered.

Mr Layburn, along with Agria senior vice president David Pasquale in New York and PWC partner in Christchurch Craig Armitage spoke to NBR following revelations that the Chinese company was facing legal class actions in the United States.

In addition to that, Agria has failed to file its 2008 financial statements by a June deadline and applied, and was granted, a six month extension. Until the company provides the 2008 paperwork to the NYSE, shareholders in both it and PGW are left hanging about its 2009 progress.

Meanwhile the lure of Agria has been too much for Mr Layburn at who used to work with chief executive Xie Tao at PWC.

At the end of this week, Mr Layburn will be come the chief investment officer for Agria, following Mr Tao who, as a partner in the Chinese division of PWC, made a reportedly shock exit from the consultancy after 20 years of service in August. Mr Tao officially started with Agria on September 14.

Mr Tao replaced Alan Lai who remains as chairman of Agria. He is also the sole director of Brothers Capital, the Singaporean-based company that is the major shareholder of Agria.

Mr Pasquale said Agria has been in contact with NYSE “every step of the way” about the late filing of its financial reports from 2008.

“Agria has been extremely upfront with investors about the whole issue.”

Mr Pasquale said NYSE rules prevented the company from furnishing shareholders with any information about Agria’s 2009 performance until the 2008 documents are filed.

The company claimed the issue arose because of allegations made by a former employee of its operating arm in China – Primalights III Agricultural Development Company (P3A).

One allegation related to the number and price of sheep bought by the company in August 2008. Another was about the authenticity of sales contracts, bank statements and tax invoices.

Until the investigations were completed and its biological assets were valued, the board of directors will not approve the financial statements.

Mr Layburn said during 2008, Agria changed its reporting method from US GAAP (Generally Accepted Accounting Principles) to IFRS (International Financial Reporting Standards).

Preliminary audits around the issues raised by the former employee have shown up nothing and Mr Layburn said it is hoped the company will file it’s 20-F (financial statements) with the NYSE by December.

The last result reported by the company was Q3 2008.

For the nine months to September, 2008, Agria reported an operating loss of $US104.9 million (RMB718.5 million) using today’s foreign exchange rates, partially due to a share-based compensation expense of about $US90 million relating to P3A.

 Why New Zealand?
Agria has agreed to buy 13% of PGG Wrightson for $36 million and could increase that shareholding when the company attempts to raise more capital next month with another share issue.

However, John Layburn said the bigger factor is the co-operation agreement between the two companies.

“The strategic investment is just one element of it,” he said.

The co-operation agreement has identified a number of areas the two companies plan to work together from seed propagation the intellectual property associated with it, to livestock expertise and sales and also retail.

Mr Layburn said the next step is going into more detailed business planning, across all sectors of discussion.

The NZ China free trade agreement, which officially began a little over a year ago, was a factor in the decision to do business here.

“And part of the thinking behind that is the relative importance of agriculture in each country,” he said.

“There are 100 million farmers in China. It’s a very important sector.”

Mr Layburn said the strengths of PGW coupled with those of Agria led to a good fit, particular in the area of seeds.

“Also, dairying is very exciting in China.”

Craig Armitage said the co-operation agreement was a tangible demonstration of the FTA working and showed that New Zealand was clearly on the Chinese radar.