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PGG Wrightson reports $5.9m loss, directors recommend Agria bid


Company tentatively endorsed partial takeover while reporting a $5.9 million half-year loss, compared to a profit of $4.1 million year-ago profit.

Duncan Bridgeman
Mon, 07 Feb 2011

PGG Wrightson has tentatively endorsed a partial takeover for the company while reporting a $5.9 million net loss for the December half year, compared to a profit of $4.1 million for the same period a year ago.

The result, on revenue of $645.86 million ($583.3 million at December 2009), comes amid a potential bidding war for the rural services company.

PGG Wrightson announced on Friday it had been approached by another party interested in making a full takeover offer, following a joint partial offer launched last month by Chinese companies Agria and New Hope Group.

The new party is believed to be Canadian agriculture group Agrium, whose assets include a half share in rural services firm RD1 in which Fonterra also owns 50%.

Agria and New Hope have offered 60c-a-share to take Agria’s PGG Wrightson holding from 19% to 50.01%. That offer values PGG Wrightson at $454.8 million.

In its target company statement on the Agria and New Hope bid, PGG Wrightson this morning recommended shareholders to wait until the near the close of the offer on April 15 before making any decision.

Independent expert Grant Samuel has calculated the underlying value of PGG Wrightson shares to be in the range of 53c to 65c.

A committee of PGG Wrightson’s independent directors said on that basis, the partial offer had merit, and recommended shareholders accept the offer in the absence of any better offer.

“However and because of the potential for an offer from another party to emerge during the Agria offer period, the independent directors recommend that shareholders wait until near the close of the Agria offer period (currently, April 15) to make their decision," the committee said.

The PGG Wrightson directors also noted the partial offer may not be attractive to all shareholders.

“While the offer will have merit for shareholders with a near term focus, or who value near term certainty, shareholders with longer term horizons may well conclude that the offer undervalues PGG Wrightson’s longer term prospects."

The Agria partial takeover offer is subject to receiving Overseas Investment Office (OIO) approval.

PGG Wrightson shares [PGW:NZX] dipped 2c to 60c in early trading this morning having rose 12.7% on Friday to 62c.

New managing director George Gould said while the interim losses were “unacceptable,” a number of one-off items had affected the result. 

He noted seasonal and sectorial impacts had also contributed negatively with the company making most of its money in the second half.

Mr Gould said a series of initiatives now under way to improve consistency of earnings.

While revenue from operations had improved, earnings before interest tax, depreciation and amortisation (ebitda) fell to $16.8 million compared to $25 million in the same period a year ago.

The PGG Wrightson board stayed with its guidance for the 2010/2011 year of operating ebitda of between $58 million to $61 million.

Chief financial officer Rob Woodgate said the balance sheet had been further strengthened by receipt of the $19.7 million payment from Olam in respect of its takeover offer for NZ Farming Systems Uruguay at 70c a share as well as NZFSU’s settlement of outstanding performance and management fees and internalisation of the management agreement amounting to a further $25.5 million. 


Duncan Bridgeman
Mon, 07 Feb 2011
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PGG Wrightson reports $5.9m loss, directors recommend Agria bid
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