PGG investors vote for sale
PGG Wrightson (PGW) will remain a sustainable business, not just a ‘‘shadow of its former self’’ once the sale of its top-performing seed business goes ahead, says deputy chairman Trevor Burt.
But job losses, restructuring and a lower share price are inevitable as PGW downsizes from a $1.2 billion to an $800 million company once its seed business is sold.
At the company’s annual meeting in Christchurch yesterday, shareholders voted 96.9 per cent in support for the $434m sale of the seed division to Danish company DLF. The sale still requires Commerce Commission and Overseas Investment Office approval.
Burt said PGW would still be the leading New Zealand rural services supplier with 2000 staff and 94 stores.
‘‘But we will need to cut our cloth to match the business that is left. We are just starting to work on the right structure and operating model for that business, working on the assumption the sale becomes unconditional.’’
This would include a review of the board and management structure.
Under the sale PGW will receive about $413m, and proposes to pay about $292m of this to shareholders. If the full $292m was paid out, this would be equivalent to 30 cents a share.
All shareholders are expected to benefit from a payment from the deal, with the biggest beneficiary being PGW’s 50.2 per cent shareholder, Singapore-based Agria Corporation.
Max Smith, a member of the New Zealand Shareholders Association (NZSA), told the annual meeting that PGW’s share price would ‘‘plummet’’ in line with the company’s reduction in assets similar to the amount that was paid out. PGW shares were trading yesterday at 57 cents each.
Burt said the remaining rural services business, without seeds, would have an operating earnings before interest, tax, depreciation and amortisation of about $35m.
The NZSA recommended against voting for the sale, and said the loss of the seeds business would leave PGW at less than half its current size.
PGW chief executive Ian Glasson said the seeds business was valued for its value-added proprietary seeds.
‘‘DLF has been traditionally more into the commodity market. One of the conditions of the sale is that they will take this technology and leverage it to the northern hemisphere.’’
The vote came after PGW chairman and Agria chief executive Alan Lai announced his retirement as a PGW director and chairman on Monday.
At the shareholders’ meeting, the sweetener offered by Burt for approving the seeds division sale was that the cash gave the PGW board ‘‘options as part of its ongoing strategic review’’.
Burt said the the seed and grain division’s operation looked positive in New Zealand but was facing weatherrelated problems in Australia and South America.
The conditional agreement to sell the division delivered ‘‘compelling value’’ to PGW, he said. ‘‘The agreement provides for an ongoing close working relationship between PGW and PGW Seeds. A distribution agreement allows for business as usual for PGW operational staff.’’