DLF/Wrightson seeds deal hits possible snag with Commerce Commission

The DLF/PGG Wrightson seeds deal has hit a possible snag with the Commerce Commission. Photo/Hawke's Bay Today.

DLF Seeds' $434 million acquisition of NZX-listed PGG Wrightson has hit a possible snag after the Commerce Commission sent a "letter of issues" to the Danish co-operative.

A letter of issues is sent if, following initial investigations, the Commission has concerns about potential competition issues that may arise from the proposed acquisition.

"A letter of issues is not a final decision and does not mean that the Commission intends to decline or clear an acquisition," the commission said in a statement.

The commission said it can give clearance to a proposed merger if it is satisfied that the merger is unlikely to have the effect of substantially lessening competition in a market.

The commission, in its letter, said it had considered information provided by DLF, PGW Seeds and other industry participants.

"We have not yet made any final decisions on the issues outlined below (or any other issue) and our views may change, and new competition issue may arise, as our investigation continues," it said.

DLF, which is owned by a cooperative of Danish grass-seed farmers, deals in forage and amenity seeds, and other crops.

It operates either directly or through its subsidiaries in 20 countries around the globe, and began operating in New Zealand in 2004.

PGG Wrightson Seeds, formed in 1990, is one of the largest seed companies in the southern hemisphere and focuses on Australasian and South American seed growing and producing with a strong presence in New Zealand, Australia, Argentina, Uruguay and Brazil.

In August, PGG Wrightson agreed to sell its seed and grain business to Danish cooperative DLF Seeds, following a strategic review.

In October, PGG Wrightson shareholders voted heavily in favour of the deal, which will free up cash for a return to investors.

The New Zealand Shareholders Association opposed the transaction, saying the short-term gain for investors was offset by the remaining business being half the size and inferior to the seeds unit.

On the eve of the meeting, PGW Wrightson's controversial chairman Guanglin (Alan) Lai announced that he was stepping down.

Lai is executive chairman of Agria, which owns just over half of PGG Wrightson.