PGG Wrightson managing director Tim Miles. Photo / Martin Sykes.
PGG Wrightson, the rural services company aiming to shed debt to woo a new cornerstone investor, plans to raise $180.a million in a rights issue at a deep discount.
Shareholders will be offered nine shares for every eight held at 45 cents apiece, a 31 per cent discount to their
trading price yesterday of 65 cents, Wrightson said in a statement today.
The issue is for 401.5 million shares and amounts to 81 per cent of the company's current market capitalisation.
The capital raising is designed to strengthen the balance sheet of Wrightson, which has $200 million of debt due in March.
Chinese-based seed and agricultural research company Agria has agreed to acquire a 13 per cent stake in the company for $36 million in a deal that hinges of Wrightson's ability to meet its debt payments.
Wrightson needs the support of major shareholders Pyne Gould, with 21 per cent, and Rural Portfolio Investments, the vehicle of former Wrightson chairman Craig Norgate and Baird McConnon, which holds 27.5 per cent.
Both have been forced to take their own steps to strengthen their balance sheets. If Wrightson can pull off the capital raising, it will emerge a stronger company though still tied to the swings in cycles of rural commodities.
"Tim Miles has a very good reputation as CEO - he's moved into a difficult are of a difficult industry and made some reasonable changes to the business," said Paul Harrison, who overseas $180 million at BT Funds Management in Auckland.
"But he's been held back by the capital structure - hopefully this will fix it."
Harrison said he is still assessing the offer. "Agriculture has extra risk - it has good and bad years so it should be valued on multiples of industrial companies," he said.
Agria's proposal to take a stake in the company is awaiting Overseas Investment Office approval.
Shares of Pyne Gould and the preference shares of Rural Portfolio Capital, a subsidiary of RPI, were halted for Wrightson's proposal. A reshuffle of Wrightson's board is also on the cards.
