Rural Portfolio Investments is scaling back its stake in New Zealand biggest rural supplies and services company PGG Wrightson.

Today PGG Wrightson announced a renouncable rights issue of more than 400 million shares to generated $180 million as part of a new capital raising plan. It will be issues at a ratio of nine new shares for every eight already held.

Major cornerstone investor RPI with 27.5% of PGGW, the investment vehicle for Craig Norgate and Baird McConnon has indicated it would not subscribe for the shares for the 10 million shares it would be entitled to under the deal.

Instead, RPI intended to subscribe for a small proportion of its rights entitlements and sell most of its remaining rights through a book-build process to be managed by First NZ Capital and UBS. This would reduce RPI’s stake in the company to about 11.8%.

Recently approved by the Overseas Investment Office, new cornerstone shareholder Agria would by about 58% of RPI’s shares at a negotiated price. Last month Agria and PGGW announced an agreement to buy a 13% stake in the company for $36 million.

Pyne Gould Corp, which has a shareholding of 20.7%, has committed to take up all of its entitlement under the issue. After the issue, PGC would have a stake of about 18.3% following the dilution of shares from the placement of shares with Agria.

Now it has OIO approval, Agria is able to take part in the rights issue with respect to the 41.1 million shares it will receive.

PGGW also planned to raise a further sum of about $32.5 million through a placement of the New Zealand dollar equivalent of $US25 million in convertible redeemable notes in the company to Agria. This was expected to be completed on January 15.

The total amount being raised by the company was expected to be $249.4 million.
In addition, PGGW expected to generated a net $70 million in cash during the 2010 financial year from operating cash flows, working capital reductions, the receipt of an outstanding fee payment from NZ Farming Systems Uruguay and the sale of non-core assets.

The total reduction in outstanding debt up until June 30 next year was expected to be about $277 million.