David Cushing has joined the board of PGG Wrightson. Photo/Steven McNicholl
David Cushing has joined the board of PGG Wrightson. Photo/Steven McNicholl
COMMENT:
A skinnier PGG Wrightson focused on servicing the Kiwi agri-sector seems like a back-to-the-future moment.
After all, the country's biggest rural services firm had built up an export seeds business, owned farms in Uruguay, had a sizeable agricultural loan book, and at one stage seemed like it had aneasy in to China's vast primary industries through cornerstone shareholder, Agria.
The Asian investment looked like a good fit a decade ago, throwing Wrightson a lifeline after the failed Silver Fern Farms merger left it with a mountain of debt smack-bang in the middle of the GFC.
While it seemed like a canny deal at the time, Agria wasn't all it was cracked up to be, last year cutting a deal in the face of fraud accusations in the US, and selling down its controlling stake when NZ regulators questioned the good character of its principals.
In hindsight, M&A didn't deliver Wrightson the desired transformation. Cue the 2017 appointment of chief executive Ian Glasson to work out what to do with Wrightson.
An Australian takeover was rumoured to be on the cards for a while, but ultimately the board settled on selling Wrightson's seeds division to Danish cooperative DLF Seeds.
The deal went for a whopping $434 million, of which $235 million, or 31 cents a share, will be returned to its 11,763 shareholders. Job done for Glasson.
To give you a sense of the scale, Wrightson's shares are trading around 53 cents. The question now is whether the rural services business's $800 million of lower margin revenue leaves Wrightson a shadow of its former self, as the NZ Shareholders' Association put it.
A history lesson might be helpful.
When Wrightson started servicing local farmers in the 1860s, it was all about sheep. Then it was dairying and cattle farming. Now, the value's in horticulture and viticulture.
In effect, it's variation of a long-term theme: New Zealand farmers selling pure, sustainable, clean green products to global consumers willing to pay top-dollar.
And Wrightson has a full offering for Kiwi farmers, whether it's giving them advice on how to get the most out of their property, selling them feed or fertiliser, trading their livestock for them, or simply acting as a realtor.
"Our basic offering is to add value to the New Zealand farmer," Glasson says.
"If you don't do that you won't exist. There's always someone looking to cut you out."
So the new "old" look could simply be what you'd expect from a cyclical agricultural business.
Former PM Sir Bill English used to scoff at scaremongering over foreigners buying farmland when commodity prices were booming, because when the party ended, the property would end up back in the hands of patient locals who knew the conditions and the land.
In that vein, an old name has cropped back up at Wrightson, although it's not of the South Island ilk you'd expect. No Pyne, Gould, Guinness, Wright, or Stephenson in sight.
Instead, the Cushings have re-entered the fray.
This isn't a new play for the Cushings. The family sold into a 2006 Wrightson takeover of Hawke's Bay stock and station agency Williams and Kettle.
And given they've bought the shares from Agria – which seems intent on cashing out of New Zealand – it wasn't overly surprising to see a changing of the guard in the boardroom.
While patriarch Sir Selwyn Cushing sat on the board between 2006 and 2012 – a period that saw the tie-up with Pyne Gould Guinness, the failed Silver Fern deal, and the introduction of Agria – son David is the one in the hot-seat now.
And if there's something the Cushings know well, its New Zealand's primary sector, be it their controlling stake in Rural Equities and its 22 farms, or the near-40-year relationship they've had with agri products maker, Skellerup.
But back to Wrightson.
Wrightson has a full offering for Kiwi farmers.
David Cushing is joined by chair Rodger Finlay, a former investment banker who's owned and farmed a dry stock operation in South Canterbury, and Southland lawyer Sarah Brown.
Finlay's the deputy chair on Rural Equities and has a seat at the board of Wrightson shareholder Ngai Tahu Holdings. Brown's governance chops include sitting on the advisory panel – with Finlay - for Shane Jones's $3 billion Provincial Growth Fund.
Wrightson shareholders still have to vote on the capital return, but no-one's expecting them to turn down cash in the hand.
What will be more interesting is whether the board comes up with a new way of doing business.
It seems like investors are yet to pass judgement as the share price is showing few signs of life, and is lagging behind the broader market.
Hopefully, Glasson shares this little nugget with the board before he leaves in June: "Understand the commodity cycle underlying your offering".
