I know what you’re thinking ...

YOU MAY have seen a chap called Simon Baker doing a fake psychic act on television. His character says things like: ‘‘You’re thinking you could be doing better . . .

‘‘You’re thinking, ‘do I have the right accounts?’ You’re thinking, ‘What kind of weirdo talks personal finance to strangers in a cafe?’ ’’

Those bank ads are surely beneath him. Instead, he should be doing revealing interviews with business people.

For example, he could sit down with the head of Agria Corporation, controlling shareholder of big Kiwi agritech company PGG Wrightson.

‘‘I know what you’re thinking,’’ he could say. ‘‘You’re thinking, ‘How do I spin this one?’ ‘ How am I going to pay off that debt?’ ‘ How do I get the New York Stock Exchange off my back?’ ‘ Why are my palms sweating?’ ’’

It would surely be a fascinating show.

Agria has been a low-key shareholder in PGW. The Cayman Islands-registered, New York Stock Exchange-listed, Singaporecontrolled, Beijing-based outfit bought into PGW when it was on its knees in October 2009.

The initial 19 per cent holding was increased to 50.2 per cent through a takeover offer in April 2011 at 60c a share. On average, Agria’s stake has cost about 59.7c a share – a sum totalling $226 million.

The investment is well under water. PGW shares are trading around 36c, making the Agria stake worth about $136m – that is, Agria and its partners are in the red by about $90m.

Those partners are worth a mention while we’re at it. The 2011 takeover was a stretch for Agria so it roped in backup from Chinese outfit New Hope Group – a big agribusiness company reporting annual sales of US$8.8 billion ($10.7b) – and iwi investor Ngai Tahu.

New Hope provided US$20m and Ngai Tahu tipped in US$11.5m. Thus, of the 50.2 per cent in PGW, Agria itself owns roughly 81 per cent, while New Hope owns 12 per cent and Ngai Tahu owns 7 per cent.

This arrangement is relevant because it places obligations on Agria. For example, New Hope has rights of first refusal if Agria wants to sell its PGW stake and New Hope also has the right to sell its stake back to Agria at a predetermined price, secured on Agria’s PGW shares.

So, if Agria buckles, New Hope could well become PGW’s new majority shareholder.

Oh, and Agria has also guaranteed its holding company for PGW will pay New Hope a minimum level of dividends. Given PGW isn’t paying dividends, the guarantee could prove onerous for Agria.

But surely Agria has other resources to call on. After all, it has substantial operations in China, doesn’t it?

Er, no. As a non-Chinese company, Agria is barred from ownership of agricultural research, development and production businesses, so its operations are conducted through proxies under contract.

What Agria can do in China is therefore down to how good its contracts are.

As it stands, Agria’s China activities derive from interests acquired since late 2008, such as Beijing NKY Seeding Development Co and Tianjin Beiao Seed Technology Development Co.

In the year to June, Agria’s China operations generated revenue of US$8.3m and a profit of US$270,000.

Although Agria plays up its R&D activities, the accounts indicate R&D spending in the year of just US$358,000.

However, Agria does have a relationship with the China National Academy of Agricultural Sciences, China’s biggest agricultural research institute.

Under a deal struck in October 2009 – the same month it bought into PGW – Agria agreed to invest money in a CNAAS subsidiary in exchange for co-operation on research. The subsidiary has rights to commercialise all seed varieties produced by CNAAS.

Sounds good, right? Unfortunately, Agria didn’t pay all the money agreed, so CNAAS can cancel its agreement with Agria at any time.

Shareholders in PGW may be interested to note that one of their directors, Dr Zhi-Kang Li, is a senior scientist at CNAAS. If I was a PGW shareholder (I’m not), I would be concerned as to whether there was the potential for loss of intellectual property to China, given the lack of commercial leverage the Kiwi company and its cornerstone shareholder have in that country.

Anyway, it should be apparent that other than