Jamie Gray: Stock takes

Turners & Growers expects future growth to be spurred by earnings from its own fruit varieties. Photo / APN

Control
Control of PGG Wrightson (PGW) has passed effortlessly to China's Agria (Singapore) Pte, despite some last-minute agitation from a company with strong links to the local tractor distribution scene, Zuellig. Zuellig has moved on to greener pastures, so to speak, but was interested right until news came through last week that Agria had exceeded 50 per cent ownership and had been granted Overseas Investment Office approval to take effective control.

Agria is jointly owned by Beijing-based Agria Corp and New Hope, which is one of China's largest agricultural and food corporations. Agria said that PGW's business required restructuring and a refocus on the core agricultural services and technology businesses to achieve its full potential.

The takeover of PGW - a company whose origins date back to 1868 - is another episode in the company's tumultuous history.

PGG Wrightson is the result of the 2005 merger between listed rural services companies Pyne Gould Guinness and Wrightson. In June 2008 PGW announced a partnership proposal - driven by former Fonterra chief executive Craig Norgate - with Silver Fern Farms, which fell through with the onset of the global financial crisis. Late in 2009 the company formed a strategic partnership with Agria, involving the placement of shares at 88c with Agria and raising $36 million, leaving Agria with a 19 per cent stake. Last December, Agria, with New Hope, announced plans for a partial takeover offer for PGW. In a new twist, the investment arm of South Island based iwi Ngai Tahu took a $15 million cornerstone shareholding in the Chinese joint venture vehicle.

Despite all the comings and goings with this deal, there still is not much information about what will happen to PGW - a company that is deeply embedded in New Zealand rural life - after the takeover. It transpires that Livestock Improvement Corp (LIC) was linked to the deal by lending Agria $10 million to see it through. LIC - a farmer-owned co-operative whose shares trade on the NZX's secondary board - will appoint a director to the board of Agria. LIC said its primary strategic interest was in supporting the PGW/AgriTech business - seeds, agrifeeds and grains.

Fair enough. But it raises the question: what is a livestock improvement company doing playing banker in this deal? LIC chief executive Mark Dewdney said LIC had worked closely with the PGW Agritech side of the business. "There are a number of things that we are looking to do together, both here and overseas, and through that relationship, we got to know the Agria, New Hope and Ngai Tahu group, who were making the bid for control of PGW," he said. "It's certainly a one-off and our primary motivation here is the strategic collaboration opportunities that exist between PGW's agritech business and with the parties that have come together to take a majority position in PGW."

THL bunfight?
Stock Takes wonders when the fun went out of takeovers. These days it seems companies can be taken over at the drop of a hat, without the once-standard boardroom histrionics, bunfights and shareholder backlashes. Tourism Holdings is in the throes of a partial takeover bid from Ballylinch LP, which is understood to be an investment vehicle for New York-based private equity investor Sterling Grace, at 67.5c a share. Forsyth Barr's head of research Rob Mercer thinks the underlying assets are worth about $1.30 a share. Tourism Holdings' assets include Waitomo Glow-worm Caves, car and motorhome rentals in Australia, New Zealand and the US, motorhome manufacturing in Hamilton, and Kiwi Experience backpacker transport. The writing could be on the wall for Tourism Holdings, but yesterday's closing level of 74c suggests Ballylinch may have to dig deeper into its pockets to get control. Perhaps we could be in for a bunfight after all.

Jazzing up Turners
Shares in fruit and produce company Turners and Growers (TUR) are trading at their highest point in a year, just as the company undertakes a strategic review to try to make the share price perform better. The board believes the company's intrinsic value has not been fully reflected in its share price for a substantial time. Even at yesterday's 52-week high of $1.75, it's still a far cry from the company's estimate of its net tangible asset backing of $2.50 per share. TUR believes there is the potential for continued future earnings growth which is not fully appreciated or understood by shareholders and investors. Part of this future growth potential will emanate from substantial investment already made in TUR's extensive growing operations and proprietary fruit varietals, it said. Turners & Growers' earnings before interest and tax (ebit) were $21.9 million for the financial year ending December 31, 2010, up 15 per cent from the previous year. The company expects future growth to come from plantings of proprietary fruit, such as Jazz apples.