Agria - a key shareholder in PGG Wrightson - is agitating for board changes at the rural services group.
PGG Wrightson’s biggest shareholder, Singapore’s Agria, says it is agitating for board changes because the rural services group’s financial performance is not up to scratch.
Agria, in a push to have controversial former chairman Alan Lai returned to the board, said “updated skill sets” were required to arrest what it said was the four-year financial decline of PGG Wrightson (PGW).
Last month, shares in PGG Wrightson tanked after the group axed its dividend in response to a 40 per cent fall in net profit to $12.7 million over the first half.
PGW is 44 per cent owned by Agria and 11 per cent by Australia’s Elders.
According to its website, Agria is an investment holding company incorporated in the Cayman Islands.
Lai fell foul of US regulators, where Agria’s American Depositor Shares were listed, in 2018.
In December of that year, the Securities and Exchange Commission (SEC) said Agria had agreed to pay US$3 million ($NZ4.86m) to settle charges that it concealed substantial losses from investors through fraudulent accounting in connection with its divestiture of its primary operating entity.
In a related action, the company’s executive chairman Lai Guanglin (also known as Alan Lai) settled charges that he manipulated the company’s share price.
A separate SEC order found that in March 2013, Lai used nominee brokerage accounts to engage in manipulative trading in Agria’s American Depository Shares in order to inflate their price above US$1 and prevent the securities from being delisted by the New York Stock Exchange.
In a statement supplied to the Herald, Agria took aim at PGW’s performance.
“While there are some small signs of performance improvement in one or two business lines, the last four years has seen inconsistent and declining business performance,” the company said.
“As a result, shareholders including Agria are seeing the ongoing erosion of value – market capitalisation, share price, dividends, international sales and demand, margins, and increasing debt levels.”
Agria acknowledged the work of the board to lead and govern “through these challenging years” but said the company now required a different skill set to improve its business performance.
“Regrettably, the business metrics and facts speak for themselves and in the best interests of the company, Agria believes an updated and new set of skills is required to arrest the four-year financial decline of PGG Wrightson.”
Agria has called for a shareholder meeting to vote on the appointments and for the removal resolutions, consistent with the best interests of the company.
“Agria has a clear interest in the long-term future of PGG Wrightson as the largest shareholder and cares about the future success of the company and that’s why Alan Lai is making himself available to be a director on the board,” it said.
The New Zealand Shareholders Association (NZSA) last week said Agria’s move to dump most of its independent directors was “one of the worst cases of board interference” seen in the past few years.
In terms of its performance, PGW’s net profit came to $17.5 million in the June 2023 year, down 28 per cent on the prior financial year.
It was nevertheless the second-strongest trading performance for the business since the PGW Seeds divestment.
The 2022 year’s profit was a record $24.3m, up 7 per cent.
At the time, then chairman, Joo Hai Lee said: “Our exceptional financial year results are a record for the business and is a result the PGW team is very proud of, especially after a challenging year at many levels.”
NZSA chief executive Oliver Mander said Agria’s push for board changes was a concerning situation for PGW itself and how it might translate for minority shareholders.
“Also we see this as setting a really concerning precedent in an NZX-listed environment.
“They (Agria) are obviously concerned about perceived profitability issues,” he said.
“For the NZSA, this is not just about performance. There is a much wider systemic issue here relating to governance quality, independence and reflecting the interest of minority shareholders.
“We believe that this provides a further example that a minority interests voting regime should become a key part of New Zealand’s listed company environment.”
In terms of the company’s performance, Mander noted that PGW was exposed to the rural sector, the fortunes of which rose and fell with the economic sentiment associated with that sector.
“There is nothing that stands out to me - positive or negative - around their performance over the last four or five years,” Mander said.
“What is worthy of note, however, is the high level of dividend payout they have made in recent years.”
Jamie Gray is an Auckland-based journalist, covering the financial markets and the primary sector. He joined the Herald in 2011.