KEY POINTS:
PGG Wrightson is now seeking up to $150 million from investors for its Uruguay dairy and beef farming venture, which it will try to list next year.
New Zealand Farming Systems Uruguay (NZFSU) could also be a forerunner to more such overseas offerings.
In September, PGG Wrightson said
it would seek more than $100 million for the venture, aimed at achieving much higher rates of return than available here by applying New Zealand farming techniques to significantly cheaper Uruguay land.
NZFSU's prospectus, released yesterday, said the offer, which opens Monday, would seek up to $150 million with a $50 million minimum.
PGG Wrightson directors are planning to put $5 million into the venture while director Craig Norgate's Rural Portfolio Investments is to put in $10 million.
Norgate said directors and associated interests contributing this "personal wealth" was significant.
"You don't often see that. Often directors of a promoter are given the bloody stake. They're putting their own money on the line here."
Norgate said NZSFU was aimed at giving existing PGG Wrightson clients an opportunity to participate in what was happening offshore "because otherwise they just end up with their heads in the sand and the competition coming".
NZSFU chairman Keith Smith described it as a longer-term farming investment rather than a property development and sale scheme.
Offer proceeds will be used to buy three dairy farms in Uruguay from PGG Wrightson and to buy and develop more. PGG Wrightson will, through related companies, manage the farms and have a cornerstone stake in NZFSU.
It was believed the potential existed to more than triple the production of milk solids per hectare from Uruguayan dairy farms using New Zealand techniques.
High quality land in Uruguay could be bought for about $3000 a hectare and converted to a New Zealand-style dairy farm for around $5000 a hectare. The comparable cost for dairy farms here was between $27,000 and $30,000.
"In New Zealand, you struggle to get a 3 per cent cash return whereas we're getting an economic farm surplus of close to 20 per cent in Uruguay," said Norgate.
A US$402,000 profit is projected for the period to the end of June 2007 and US$1.68 million the next year. But it is expected investors will have to wait until 2009 for their first dividend. Then, the company wants to be able to pay a minimum after tax yield of 6 per cent on the initial $1 per share investment.
Norgate said PGG Wrightson's three Uruguay dairy farms would cost NZFSU nearly US$12 million in cash and shares, a small "immaterial" profit over book value.
On the prospect of more such offers, Norgate said: "We wouldn't do something anywhere else until such time as this one's well on its way." But he was confident NZFSU would do well.
Once the Uruguay operation was fully functioning, PGG Wrightson planned to look at Chile, then Argentina and Brazil.