PGG Wrightson acquires 50% stake in Uruguayan agri firm for undisclosed sum

See also: Uruguay buy protects PGG Wrightson's $US100m business

PGG Wrightson [NZX: PGW], the rural services firm controlled by China's Agria Corp, will take a 50% stake in Agrocentro Uruguay for an undisclosed amount, made up of an upfront payment and capped earn-outs over the next three years.

The Christchurch-based company will buy half of the Uruguayan rural services company, which is already Wrightson's largest seeds customer, it said in a statement. Wrightson has been involved with Agrocentro since its inception in 2007. Wrightson executives weren't immediately available for comment.

"This investment makes good strategic sense for both parties," Wrightson group general manager of seed & grain John McKenzie said. "We have common goals for the future and this alignment of interests sets the business up well for future growth and complements PGG Wrightson's existing South American operations well."

The move comes several years after Wrightson sold its management contract with NZ Farming Systems Uruguay, the dairy farmer it set up in 2006 in an attempt to buy cheap land in Uruguay suitable for dairy conversion and export New Zealand's intensive farming techniques into South America. In 2012, Singaporean commodities company Olam International bought 78% of Farming Systems, changing the agreement with Wrightson and opting out of a preferred supplier agreement with the company.

Agrocentro developed technology systems in meat production and forage based seed production. It has four business units including retail and distribution of agricultural inputs, farming, logistics and consulting. It employs 120 people and has eight retail branches.

Wrightson has upgraded its forecast for annual earnings twice this year, and expects annual operating earnings before interest, tax, depreciation and amortisation to be between $66-69 million  in the year ended June 30, up from $58.7 million a year earlier. It also warned weak farmer confidence may weigh on future sales.

The company's shares were unchanged at 47c and have gained 2.2% since the start of the year.

(BusinessDesk)