New PGG Wrightson suitor keen on joint bid

Hong Kong based private investor Zuellig Group is talking to potential investors about a possible partial takeover of rural services group PGG Wrightson.

The Group’s Sydney-based executive Peter Williams arrived in New Zealand yesterday to begin talks with PGG Wrightson and a range of stakeholders.

Zuellig’s interest comes as shareholders consider an existing partial offer from Chinese companies Agria Corporation and New Hope Group.

Agria is seeking to move from 38.3% ownership to control at 50.01% by paying 60 cents a share. That offer is open until April 15.

While Zuellig itself was not looking for a controlling shareholding in PGG Wrightson, it was open to joining a consortium that might look at a combined 50% stake, Mr Williams said.

“One of the areas under consideration is to perhaps do just that in consortium with a New Zealand investor. I think there is a construct for that but it would depend on discussions still going on. With the right partnership, yes, we think it is a better way of doing things.

The Zuellig Group is a privately owned conglomerate with a turnover of over $US12 ($NZ15.9) billion.

The group currently owns and manages investments in healthcare distribution solution and pharmacy services, agri-business manufacturing and distribution and agricultural and materials handling equipment supply and services.

Locally the Group owns tractor distributor CB Norwood and has a 27% stake in retailer Pharmacy Brands.

Mr Williams said Zuellig would be a strong partner that could benefit PGG Wrightson.

“We would have clear simple ideas for the company that I’m sure would not be contrary to the vast majority of shareholders,” he said.

“The ideas we would come up with would not be earth shattering. They would be back to basics and return PGW to what it was.

“So unless I’m completely out of sync with where I see the rural views of this country I cant see how anyone that didn’t want that would have an issue with it.
“It is not the right time for PGW to disappear as an independent company.”

Mr Williams said Zuellig was serious about making a strategic investment in the company and not simply on a tyre kicking exercise while trying to prevent Agria getting control.

He said Zuellig had already looked over PGG Wrightson in late 2009 when it was raising capital, a process that saw Agria take up a 13% shareholding which it later increased to 19%.

“We liked what we saw in the company,” Mr Williams said. “But we were concerned with corporate governance and issues of that ilk and we disengaged very quickly.”

“This time around it’s very much based on what we see as a strategic acquisition. I don’t think we should posture ourselves as preventing Agria taking control if that’s what shareholders want.

“But I do think it’s beholden upon us to stand up and say have you really thought this through? Because in absence you are going to pass control over and that will be it. There’s no second chance.”

Mr Williams said one of the options for Zuellig was to look at acquiring Pyne Gould Corporation’s 19% stake in PGG Wrightson if it became available. PGC has agreed to sell to Agria and has contractual arrangements in place.

PGG Wrightson's independent directors have recommended that shareholders accept the Agria offer in the absence of a better one.

Agria’s bid falls within the valuation range of an independent expert report.

PGG Wrightson’s independent committee has said that while the Agria offer would have merit for shareholders with a near term focus, or who value near term certainty, shareholders with longer term investment horizons may well conclude that the offer undervalues PGG Wrightson's longer term prospects.

Last week PGG Wrightson said a second party had withdrawn from due diligence and was not proceeding with a takeover offer.

That party was believed to be Canadian group Agrium, which recently acquired a half share in RD1 – a major competitor to PGG Wrightson.