Trans-Tasman business speculation is running hot about potential Australian takeover interest in historic New Zealand farm services firm, PGG Wrightson.
PGW shares gained new ground in the past week – up from NZ57 cents to a NZ64c peak – spurred on by the possible sell-out by the NZ company’s 50.2 per cent majority stakeholder, Singapore’s Agria Corporation.
Agria is itself part-owned by China’s food and agribusiness giant, New Hope.
What’s at stake?
The $450 million PGG Wrightson operation spans farm merchandising, livestock and wool trading, wool scouring, machinery, water services, and seed and grain sales, and includes Australian activities.
Australia’s big three farm services players, Elders, Ruralco and Landmark (via Canadian parent company, Nutrien), have all been touted as running the ruler over PGW, which has the biggest share of the farm services market across the Tasman.
Other possible contenders suggested by financial commentators include the Hong Kong-listed CK Life Sciences, which may be a potential suitor for the seeds division, and CHAMP Private Equity, which owns Accolade Wines and was the previous owner of GrainCorp’s malt business.
Guarded comment
Elders has played down any serious interest in what would be a $200m-plus partial stake in the 177-year-old company, while Ruralco has declined to fuel any speculation about its plans.
Landmark says it will look at any opportunities to expand and judge them on merit, but would not be commenting publicly beforehand.
Only four years ago Elders sold its own NZ agency and wool businesses to the Carr family’s Carrfields group as part of an asset sell-off to help repay a $1 billion debt load which almost sank the company.
PGG Wrightson, with a stock market equity value of about $450m, includes the sizeable PGG Wrightson forage crop and pasture seed business across Australia, and the North West NSW grain handling, storage equipment and seed sales firm, Grainland, at Moree.
PGW also has South American crop and pasture seed storage, cleaning and sales interests, principally in Uruguay, but also Brazil, Argentina and Paraguay.
Australia’s AuctionsPlus electronic marketing service also talked briefly with Wrightsons last year about being part of a possible NZ partnership, although nothing has progressed further.
Profits down
The company has just posted an after-tax net profit of $13.6m (NZ$14.6m) for the six months to December – down about $375,000 on the same period in 2016-17 – and is tipping a full year after tax profit about 20pc below last year.
Speculation about the future of Agria’s controlling interest, gained in 2011, began when PGW recently appointed Credit Suisse (Australia) and First NZ Capital as financial advisers to assist in a strategic business review.
The report is looking at growth opportunities, capital and balance sheet requirements, and potentially shareholding structure.
PGW chairman, Alan Lai, who also chairs Agria, told last month’s financial results briefing the review was ongoing and PWG should be able to comment further “later in the year”.
At the same time the company has been weighing up implications of NZ’s Overseas Investment Office which has been routinely investigating the “good character” status of Agria as part of its scrutiny of foreign investment in agriculture and following Agria delisting its public business in the US.
PGW, which has a payroll of about 2100, has emphasised its willingness to assist OIO inquiries.
Australian connection
Since November Wrightsons has been headed by expatriate Australian, Ian Glasson, the former chief executive officer of Wilmar’s local sugar business (previously CSR Sugar), a past Goodman Fielder executive, and a current director of SunRice.
The Australian Financial Review has suggested Adelaide-based Elders wants to buy PGW in its entirety, while Ruralco would be more focused on PGG's seeds unit, with both companies likely to raise equity capital to help fund their ambitions.
Ruralco has been steadily building its agency and water business retail network base, raising additional equity last year and when it acquired the Total Eden water services group in 2014.
A Ruralco spokesman said the company would not comment on the speculation.
Elders managing director, Mark Allison, was less evasive saying while it was reasonable to look at what was going on in NZ, his company’s focus was on smaller bolt-on initiatives.
Elders has recently added agencies in Hamilton, Victoria, and Bunbury, WA, to its ranks and expects similar acquisitions to provide about half its business growth in the next five to 10 years.
“Sure, if Landmark, or Ruralco, or Ridley or any similar agribusiness came up on the horizon we would want to keep an eye on them, but what we’re really looking at is smaller scale, incremental expansion,” Mr Allison said.
“There are always plenty of rumours about potential takeovers – you don’t get too carried away by them.
“Last month it was a private equity offer for Ruralco, and last year the talk was all about Landmark.”
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