Chinese bid for PGG Wrightson

PGG Wrightson’s large Chinese shareholder is making a bid for control of the rural services company.

Agria Corporation, which already has a 19% shareholding, is offering 60c a share to take its total stake to 50.1%.

Agria has already agreed to buy Pyne Gould Corporation’s 18.3% holding and has another 5% held by an HSBC nominee company.

This takes its total shareholding to 42.4%, leaving only about to 65 million shares to reach the target.

PGC said total the sale of its shareholding would slice $30 million off its half-year result to December 31, with an estimated loss overall of $31-33 million.

The Agria bid values PGG Wrightson at $455 million.

Agria is bidding with another Chinese agribusiness company, New Hope Group.

The 60c a share offer is a 25% premium to yesterday's closing price of 48c a share. The offer is open until April 15.

The bid is subject to Overseas Investment Office approval.

Earlier this week, the OIO rejected a bid by another Chinese-backed company to buy the Crafar farms.

Background and company statements

Xie Tao, CEO of Agria and PGW director, said, "This offer will provide existing PGW shareholders an attractive opportunity and flexibility to sell a proportion of their shares at a premium to the current market price and also allow them to retain an involvement to benefit from the longer term opportunity Agria and New Hope will offer PGW. We are particularly keen to strengthen the relationship between PGW and its key farmer customers and shareholders, who we see as playing an increasingly important role in PGW in the future."

New Hope is one of China's largest agricultural and food corporations. The group has revenue in 2010 of approximately RMB 60 billion (equivalent to approximately $NZ12.1 billion) and operates throughout China, and in Southeast Asia. New Hope Group has four large business units - agriculture and food (accounting for 85% of revenue), chemicals and resources, real-estate and financial businesses.

New Hope's chairman and founder, Liu Yonghao, is vice-chairman of MinSheng Bank, one of China's largest commercial banks. He is also a member of the Chinese People's Political Consultative Conference (CPPCC) economic committee. [UPDATED: Forbes puts Mr Liu at 21st on its list of China's 40 billionaires at $US3 billion; his older brother Yongxing is seventh at $US4.9 billion. The brothers went their own way in 1996 after starting the Hope Group seed business in the 1980s when the Chinese economy was opened up.)

New Hope Group is "looking to strengthen its core focus with global partnerships, to contribute to the bilateral agriculture partnership between China and New Zealand, and to contribute to the future growth of New Zealand's agriculture industry."

New Hope will be Agria's investment partner and brings to bear a level of participation and reach in the China agricultural sector that parallels PGW's involvement in the NZ industry. New Hope and Agria have entered into a subscription agreement in respect of their ownership and participation in Agria (Singapore).

Xie Tao added, "PGW has underperformed expectations in recent times, including a recent profit downgrade. In Agria's view, PGW's business requires restructuring and a refocus on the core businesses of agriServices and agritech to achieve its full potential.

"The proposed transaction will provide PGW a committed cornerstone shareholder with the capacity to leverage PGW's product and service offering to access opportunities in the China market for the benefit of all PGW shareholders. This also introduces to PGW the financial capacity to refocus and significantly grow the key PGW's businesses.

"If this offer is successful PGW will remain as a NZ-based listed company with a strong board led by chairman Sir John Anderson. I also look forward to working with the new managing director of PGW following his appointment, which we understand is expected to be announced by PGW in the coming days."