Agria's partial takeover offer for PGG Wrightson falls within the range assessed by an outside valuer and has won backing from the target's independent directors in the absence of a better offer.
Grant Samuel says the underlying value of Wrightson stock is 53 cents to 65 cents.
Agria and partner
New Hope Group of China have offered 60 cents a share to lift their holding to 50.01 per cent from 19 per cent currently.
On Friday, Wrightson said it had been approached by a new bona fide bidder, though it gave no details.
"On the basis of the Grant Samuel valuation and in the current absence of any better offer, the independent directors recommend to shareholders that they accept this offer," chairman and independent director John Anderson said in a statement today.
Still, with potential for a new offer to emerge, shareholders were advised to hold off on accepting Agria's proposal until nearer the April 15 closing date, he said.
Landmark, the Australian rural services firm owned by Canadian fertiliser producer Agrium, has declined to comment on whether it is the mystery group that's made a takeover approach to Wrightson. Landmark owns half of RD1, a competitor to Wrightson in rural services, in a venture with Fonterra.
Grant Samuel said the Agria offer "compares favourably" with earnings multiples implied by recent comparable deals, though this partly reflected the "negative near-term earnings outlook for Wrightson."
That means the offer will have merit for shareholders with a short-term focus but those with a longer-term horizon "may well conclude that the offer undervalues PGG Wrightson's longer-term prospects."
New Zealand's largest rural services company separately today reported a first-half net loss of $5.9 million even as revenue climbed 11 per cent to $646 million. It retained its full-year forecast for operating earnings before interest, tax, depreciation and amortisation of $58 million to $61 million.
The proposal has won the support of major shareholders including Pyne Gould Corp., which would sell its 18.3 per cent holding into the offer, and of investment interests associated with director Selwyn Cushing, Wrightson's target company statement says.
Shares of Wrightson fell 3.2 per cent to 60 cents on the NZX. Pyne Gould was unchanged at 35 cents.
PGG Wrightson chairman Sir John Anderson. Photo / Mark Mitchell
Agria's partial takeover offer for PGG Wrightson falls within the range assessed by an outside valuer and has won backing from the target's independent directors in the absence of a better offer.
Grant Samuel says the underlying value of Wrightson stock is 53 cents to 65 cents.
Agria and partner
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