LIC move stirs talk of split in PGG Wrightson

Mark Dewdney, chief executive of dairy co-operative LIC. Photo / Sarah Ivey

The takeover of PGG Wrightson by Chinese firm Agria has taken another twist with speculation the rural services company could be split in two.

Hamilton-based Livestock Improvement Corporation (LIC) confirmed its support for the Agria/New Hope/Ngai Tahu Holdings partial takeover offer for a 50.01 per cent shareholding in PGG Wrightson, through a $10 million loan to Agria Singapore.

Ngai Tahu planned to take a cornerstone shareholding in PGG Wrightson through a joint venture with the Chinese companies.

LIC chairman Mark Dewdney confirmed the dairy farmer-owned co-operative had supported the Agria bid through a $10 million loan to Agria Singapore, which is making the current partial takeover offer for PGG Wrightson.

The loan is for a term of 18 months with security provided by Agria Singapore.

LIC will appoint one director to the board of Agria Singapore.

Dewdney said LIC's prime strategic interest was in supporting the PGG Wrightson agri-tech businesses - seeds, agri-feeds and grain.

It had no plan to invest directly in the overall businesses of PGG Wrightson (rural supplies, real estate, livestock and finance), he said.

"LIC is not becoming a shareholder in either PGGW or Agria Singapore and our intention would only be to invest directly into a separate PGGW agri-tech business, if such a structure is ever established by PGGW."

Craigs Investment Partners broker Chris Timms said there had been plenty of market speculation about what would come out of the takeover proposal. News of some "left field" players only surfaced last week.

The agri-tech businesses, seeds in particular, are regarded as the "jewel in the PGG Wrightson crown" and would always have been the most sought after, he said.

"They have good technology in the business and it is the high-quality side of the business. I suspect that is why [Agria] wants a stake," he said. "[Agria] will have easier access to the seeds and grains."

The seed business has been the most resilient in past years, he said.

Ngai Tahu wanted to get alongside the Chinese investors but also broaden its exposure to New Zealand's rural sector and LIC saw the opportunity to get involved in a quality part of the business, Timms said.

However he believed a 75 per cent vote would be needed for a structural separation of the company and a 50.1 per cent stake would not be enough.

PGG Wrightson shares closed at 50c - down 1c - on Thursday.

- OTAGO DAILY TIMES