Norgate loses control of PGW

Craig Norgate. Photo / Richard Robinson

Craig Norgate - the man who brought PGG Wrightson together as a business - will no longer own a controlling stake and may lose his seat on the board after a $249 million capital injection plan is completed.

New Zealand's largest rural supplier revealed details of its long-awaited capital raising and rights issue yesterday as well as a clearer picture of the future ownership of the company.

Nearly half the new money it is raising will come from the coffers of Chinese agricultural company Agria, which will end up as the largest shareholder of PGW once the deal is complete.

Last month Agria committed itself to buying a 12 per cent stake in PGW as part of a placement offer valued at $36.2 million.

PGW chairman Keith Smith said all conditions of that offer had now been met including approval from the Government's Overseas Investment Office.

Agria yesterday said it intended to take up its full allocation of shares in the $180.7 million rights offer worth $20.8 million as well as buying more than half of the rights allocated to Rural Portfolio Investments (RPI) - the investment company of Norgate and the McConnon family.

Agria will pay RPI $25.6 million for the rights, boosting its share in the business to 19 per cent, while RPI's stake will plummet from 27.5 per cent to 12.4 per cent.

Agria has also committed itself to a further injection of US$25 million ($32.5 million) in the form of convertible redeemable notes paying 8 per cent interest which will be used to increase the equity in PGW's finance business in preparation for meeting new finance company regulations.

Chairman Keith Smith said the company would complete a review of its governance once the capital raising was completed but the new board would consist of eight non-executive directors and managing director Tim Miles.

Agria would have two seats on the board while Pyne Gould Corporation, which yesterday said it would take up its full share of the rights for $33.1 million, would also have two.

PGC will have its stake reduced from 20.7 per cent to 18.3 per cent under the deal.

Smith said three of the eight directors would be independent, including the chairman's role which he has already indicated he would like to step down from.

But exactly who will fill the remaining seat is still to be determined. Both Norgate and Baird McConnon are currently directors.

Smith said any board changes would not take place until February next year and would be phased in to ensure continuity within the business.

But Norgate said he did not see the shareholding reduction as a loss of power and the full composition of the board had yet to be determined.

"The directors of the board will be appointed based on merit. I don't see my role changing."

Options could include RPI dropping one representative on the board or the board increasing to nine non-executives, he said.

Norgate said it was frustrating that RPI could not afford to take up its full share of the rights.

"But that is the reality of markets."

He did not rule out RPI increasing its stake in PGW in the future.

"It is still the right company, and the right sector and now we will have a balance sheet that nobody can question."

Market commentator Arthur Lim said it was unfortunate that Norgate had had a bad stumble at the worst time ever.

But he believed the company had now got through its toughest challenge - raising money when two of its biggest shareholders were struggling to come up with the cash.

PGW was placed in a trading halt yesterday and last traded at 65c. Shares in PGC closed down 1c on 47c.

CAPITAL INJECTION


* $36.2 million placement by Agria at 88c a share.


* $180.7 million rights issue via a fully underwritten rights issue of nine shares for every eight held at 45c per right.


* $32.5 million convertible note paid for by Agria with 8 per cent interest.


RAPID EXPANSION
* Craig Norgate formed Rural Portfolio Investments in 2003 and purchased Wrightson in 2004. He bought William & Kettle into the fold later that year and in July 2005 proposed a merger with Pyne Gould Guinness. But an attempt to buy a 50 per cent stake in Silver Fern Farms went badly wrong last year and cost PGG Wrightson $49.6 million.