PGW - PGG Wrightson

[Snoopy]

Don't get me wrong, I don't want the finance business sold, however rural finance is not what it used to be. Once upon a time everyone had seasonal finance from their suppliers, these days most farmers work wih a large bank overdraft at suprisingly compeitive rates to keep things simple. Most the people using wrightsons etc for seasonal type finance now are the ones whose od is maxed.

Financing herds and land and bulding is still profitable but hardly essential to wrightsons business, they will only really pick up customers who fail bank lending criteria. I'm no longer of the view that a finance business is still essential to a rural services operation, however it is sill a well run profitable finance unit and I would prefer them to keep it.

Thanks for that update on how financing for farmers has changed Doyle. I do think though that there is room for a second tier finance market for farmers who through unanticipated climatic and bank policy changes allows them additional financial flexibility. It wouldl\ be a pity if PGW were no longer in it.

SNOOPY

[Balance]

Answered my own questions ... Big difference! ... Anyone else?

Keep the answers, Belg.

Use the opportunity this week to pick up a few more shares from the uninformed out there before the instos come back next week.

[Snoopy]

If Fin business is sold ... who much will PGW get? ... What impact will that have on their debt mountain? ... How much will their ann interest bill be reduced? ... What effect will this have on the bottom line?


Answered my own questions ... Big difference! ... Anyone else?

You are assuming any sale of the finance division money will remain within PGW Belg. Once Agria gains control they may force PGW to declare a special dividend to effectively finance their controlling acquisition. If that happens there will be no reduction in the debt mountain and no reduction in interest payments. Consequently profitability of PGW will not improve, and may even decline.

SNOOPY

[winner69]

Out for an afternoon walk when meant to be working and met this old geezer who i know but hadn't seen for a while and he started telling me about the unsolicited offer he got in the mail this morning ...... telling me that that taht scamster joker Whimp he had read about in the paper is now using Agria and New Hope as their new name and was trying to get his PGW shares for 60 cents ... cheeky bastard he said and did what the papers had suggested and put a blank piece of paper in the envelope and posted it back ... and was quite proud of his efforts in teaching the bastard a lesson in trying to rip him off

After a good laugh I told him that this offer was kosher and that 60 cents was a pretty good price ....... much to disbelief .......... 'Jesus Christ - last time I looked they were over 2 bucks .... f***** h*** whats the world coming to .... hope they have shot the bastards running the outfit' was part of the tirade

Needed to take him to the local for a whiskey to get over it .... seeing it was only early afternoon winner had a latte

[Beagle]

So I guess you guys are buying up large at 52/53 cents knowing you'll probably get at least 60 cents for some of your shares and hang on for the ride with the rest.

Begs the question, if its such a good situation why is the price where it is ? (Paid 54c a little while back and am somewhat perplexed)

[percy]

Out for an afternoon walk when meant to be working and met this old geezer who i know but hadn't seen for a while and he started telling me about the unsolicited offer he got in the mail this morning ...... telling me that that taht scamster joker Whimp he had read about in the paper is now using Agria and New Hope as their new name and was trying to get his PGW shares for 60 cents ... cheeky bastard he said and did what the papers had suggested and put a blank piece of paper in the envelope and posted it back ... and was quite proud of his efforts in teaching the bastard a lesson in trying to rip him off

After a good laugh I told him that this offer was kosher and that 60 cents was a pretty good price ....... much to disbelief .......... 'Jesus Christ - last time I looked they were over 2 bucks .... f***** h*** whats the world coming to .... hope they have shot the bastards running the outfit' was part of the tirade

Needed to take him to the local for a whiskey to get over it .... seeing it was only early afternoon winner had a latte

Good boy,it is really nice with a dram!!!

[RazorX]

I paid 57 cents for my shares... not sure I should take up the offer? 60c won't be much of a gain so it comes down to "are these shares worth holding on to"? If the price goes above 62c I will make more by holding then selling later. Any suggestions? What are other shareholders on the forum going to do?

[geezy]

I will sell as i participated in the capital raising , avg around 54 , not much of a gain but dont see this company having much improvement in the next 1-2 years , unless Agria takes over management. (Sorry!)

[Blendy]

me too, i bought at 56, but figure might as well cash out and use the money on something else.

[GTM 3442]

I don't think Agria are stupid.

If they're prepared to pay 60c, isn't that an indication that they think they'll be buying something worth more than 60c ?

I can't imagine they're paying 60c in the expectation of getting something worth less.

Surely ?

[Blendy]

that's what i was thinking too - otherwise why would they bother? Hmmm.... undecided....

[iceman]

that's what i was thinking too - otherwise why would they bother? Hmmm.... undecided....

I think and hope getting Agria as a cornerstone shareholder will shake up and refocus this company, which has been floundering of late. So I welcome Agria and will sell them 38% of my shares (at a reasonable profit), which is what they are after, and keep the remaining 62% and go with them for the ride hoping for the best !! That of course is assuming their offer will be successful !

[winner69]

You have got 70 odd sleeps to decide .... a lot can happen in that time

The experts report might say Agria is doing a Whimp and the offer is 'unfair'.... then again the NZX50 might fall below 3000 and Agria can walk away (or change the offer?)

Wouldn't worry too much at the moment about what to do

[percy]

Surely? Nope, they may just be there for the capital play in splitting off PGW Finance and could be very short term holders indeed!

They are after the seeds business.They have a lot of people to feed.

[mikew]

Another party who has indicated an interest in making a full takeover offer for PGW


It was announced on 14 January 2011, that the PGG Wrightson Limited (PGW) Board had formed a Takeover Response Committee (“Committee”) to discharge the Board’s obligations under the Takeover Code. The Committee, which compromises independent directors’ Sir John Anderson, Keith Smith and Bill Thomas, has the delegated authority of the PGW Board to determine PGW’s response in relation to the partial takeover received from Agria (Singapore) Pte Ltd (Agria) and to deal with any other related takeover issues.

As previously advised, PGW will issue its Target Company Statement in response to the Agria offer on Monday, 7 February 2011. The Target Company Statement will include an Independent Adviser’s Report from Grant Samuel and a recommendation from the Committee.

In the meantime, the Committee notes that it has received an approach from another party who has indicated an interest in making a full takeover offer for PGW. That party, who the Committee considers to be a bona fide potential bidder, has requested that it be permitted to undertake due diligence in relation to PGW. The Committee has agreed to this request.

While there is no certainty of a better bid emerging following due diligence, the Committee considers that this is a material development about which PGW shareholders need to be informed.

Given the potential for another offer to emerge during the Agria offer period, the Committee recommends that shareholders wait until nearer the close of the Agria offer period (currently, 15 April 2011) to make a decision on the Agria partial takeover offer.

Any takeover situation is dynamic and this means that circumstances could change materially before the nominated offer closing date.

For further information:

Maurice Noone
021 343 543

[Snoopy]

PGW will benefit and Agria's 60c offer will soon look like theft!


Interested to read about 'New Hope'. Agria's bidding partner in what looks like a takeover battle. They seem much bigger than Agria ($NZ12b in revenue) yet are very much taking a back seat in the takeover process. Perhaps they just want to see how things go, but I don't understand why 'New Hope' have to be involved at all. Is 'New Hope' the conduit through which Agria must operate in China if it wants to sell seeds? Or is Agria really a house of cards sitting on heavy investment losses that have overstreched themselves and have they been forced to bring in 'New Hope' to save face?

SNOOPY

[mikew]

Could it be PGC ??? ... probably not ... Probably asian?

Canadian group potential PGG Wrightson bidder

New takeover interest in rural services company PGG Wrightson, announced by the company this morning, is understood to be from Australian company Landmark, a subsidiary of Canadian agriculture group Agrium.

Landmark currently owns half of New Zealand farming supplies company RD1 in joint venture with Fonterra.

A full takeover offer would need a bid of 70c-80c, said one, and would likely be immediately matched by the Agria consortium.

[climbtree]

ARGGGGGGGGGGGGGGGG I put a sell bid out last night at .56 because I needed the money, woke up late quite happily to find it had sold. I'm kicking myself.

[root]

That 60c offer is not looking so good now!

[nwood]

Was seriously considering exiting at 60, but in light of the recent developments I think I'll hold on for the ride :)

[mouse]

A lot can happen in a day!

[Balance]

Balance me ol' mate ... Go ahead. Time to gloat :) ... I'll let you do it as I'm feeling far to smug to bother :)

What is there to say, really, Belg-me-ole-matey?

Yet another outstanding example of the investment acumen (not!) of the average NZ investor - sell when it's time to buy and buy when it's time to sell?

[RazorX]

That 60c offer is not looking so good now!

No it isn't - share price closed at 62c. I think I'm going to hold mine.

A rising share price will hurt Agria's chances of completing their bid to acquire 50.01% shareholding?

[Balance]

Not at all - profits are there for the taking. I am referring here to those who have had PGW shares for decades.

But before taking your profit, consider - NZS all over again though?

This could very well flush out another player who will take the opportunity to make a higher offer now that Agria & PGC have shown their hands?

Meanwhile, there was a crossing of 5m shares at 48c a few weeks ago - that's $600,000 less for the seller and $600,000 profit for the buyer. Case of the transfer of wealth from the impatient to the patient?

Posted 23 December.

Be there or be square.

This game is easy - history repeats itself.

Not that you will know from the behavior of NZ investors.

[root]

Posted 23 December.

Be there or be square.

This game is easy - history repeats itself.

Not that you will know from the behavior of NZ investors.

Hopefully the second interested party (possibly Agrium?) turns out to be something solid, lot of turns to go in this race and a long way to April. Nice position to be in. :)

[percy]

Good article in today's nz herald by Fran O'sullivan.

[winner69]

Reading the heaps of stuff that has come out over the last few weeks I have come to the conclusion that PGW is well and truely f###ed .... almost f###ed beyond redemption

They might have the biggest seeds business in the southern hemisphere which might be the envy of the chinese and they might have a half decent finance company that could interest local players who want to become big at any cost ..... but the current board and management has no idea how to make money out these assets .... the only real idea they have come up recently is to restructure the business so they can focus on the key areas

Gould might be a guru in his field but in this sort of business I think not .... the Chairman of the board who so many thought was going to bring some direction to this outfit seems to have thrown his hands up in despair and waved the white towel by recommending a partial takeover ... without even knowing what his new masters are going to do to turn this around

The only hope for current shareholders is that there is a bit of a bidding war and somebody takes the whole lot for something like 70 to 80 cents .... and put everybody out of their misery ... once and for all. Too late now but the best way forward is to hock off the finance arm pronto and distribute the cash and then let the chinese and canadians fight over the seeds and rural bits

Shareholders need to be put out of their misery ..... I have come to the conclusion that no way in the world will PGW ever be profitable enough to sustain a shareprice anywhere near a buck, even with what the Chinese might bring to the table .... it is well and truely f###ed

[Snoopy]

a bit of a bidding war, somebody takes the whole lot for something like 70 to 80 cents .... and put everybody out of their misery .... The best way forward is to hock off the finance arm pronto and distribute the cash and then let the chinese and canadians fight over the seeds and rural bits


Keep the finance arm, bundle it up with rural services and sell to Agrium. The remaining seeds business goes to Agria. A huge payout to George Gould should end the sorry story. But how to engineer this?

SNOOPY

[Snoopy]

I have come to the conclusion that no way in the world will PGW ever be profitable enough to sustain a shareprice anywhere near a buck, even with what the Chinese might bring to the table

$1 per share became a fantasy as soon as 442.6m PGW shares at an average price of 54c were issued in 2009. That increased the number of PGW shares on issue by 140%.

SNOOPY

[mouse]

I am furious that another NZ Company is going offshore. First we lost NZ Farming Systems, now Wrightson. The problem is we 'dont save enough'. The Chinese save more. The only flaw with argument is that is our NZ Govt doing the saving for us. Our tax payment per person must be around 50% of income. The Govt then gives us a bit back.
Compare that to China. Low taxes but no benefits. Chinese must do their own saving. Which they invest in banks giving very low interest. Agria just happens to own one of the banks! So we have crony capitalism buying our companies. Nothing to do with saving more down here. What is needed is more cash in the system so we can afford to buy our own shares. Comments?

[RRR]

With due respect, I dont see any logic in your argument mouse. Do you pay any taxes or are you retired? Let us begin there. Saving is individual responsibility and not for the state to do it. Raising taxes will only do harm. The problem is all our money is stuck in the expensive, and currently illiquid property market. Asset rich and cash poor!

[winner69]

$1 per share became a fantasy as soon as 442.6m PGW shares at an average price of 54c were issued in 2009. That increased the number of PGW shares on issue by 140%.

SNOOPY

A few years ago market cap was over $700m - if it got back there PGW share about a buck

Isn't a buck a realistic expectation based on all the good things you hear (even from those on thsi forum) about PGW

Things like Agria must think its worth more than 60 cents else they wouldn't be offering that but then they only want the seeds according to percy so they get that cheap and shareholders are left lamenting with the rest and a primamry industries boom will boost eanings ... in theory but PGW have a proven track record of letting these opportunities pass by

Some think the future is good for PGW and if so couldn't they make $60m-$70m a year to support that buck shareprice ..... of vourse not ... never done it in recent times and because the business model is f###ed never likely to

So lets hope that somebody takes out PGW north of 60 cents and put shareholders out of their misery once and for all ... and then let the new owners potter around with it before they realise that it is well and truely f###ed and they wasted their money in buying a dog

Mouse - it is not a matter of saving in this case. It is the inability of many to make a go of this company ..... people have put zillions into this company over the years and probably made no return (collectively) .... is that a good income for peoples 'savings'.

[percy]

If I may rant a bit.The stock and station business [rural supplies] of PGW is an OK business if run well,which Gould should be able to do.
The seeds business is like Coca Cola.You can sell franchises off around the world.What is happenning is PGW are selling "the secret formula".Well not really selling it,giving it away.Crazy,buy the Coca Cola franchise in one country for very little and get the secret formula for the world.Once it is sold,it is gone.Can you see the Yanks paying the Chinese a franchise fee for Coca Cola?That is exactly what is going to happen;NZ farmers will have to pay the Chinese a franchise fee for seeds.
I agree PGW has been miss managed,but to give the secret formula away is just plain crazy.Mouse can see this.
No I do not hold any PGW shares.

[Snoopy]

Chinese must do their own saving. Which they invest in banks giving very low interest. Agria just happens to own one of the banks! So we have crony capitalism buying our companies.


Would you enlighten us as to where you get your information from Mouse? Mine comes from p27 of the Grant Samuel report on the PGW takeover offer.

Agria appears to be largely controlled by chairman Alan Lai with 38% of there shares. Both he and CEO XT are ex Price Waterhouse Coopers, not bankers. There is no mention of Agria ever owning any banking assets and they certainly don't now. Following the sale of Agrias principal business 'Primealights III Modern Agriculture Development Co. Limited' (P3A) to the former Agria CEO, it appears that Agria is little more than a shell company, dwarfed in market capitalization by their potential acquisition target, PGW. My best guess description would is that Agria today is a listed hedge fund, trying to deal its way to corporate respectability.

SNOOPY

[Snoopy]

.... the Chairman of the board who so many thought was going to bring some direction to this outfit seems to have thrown his hands up in despair and waved the white towel by recommending a partial takeover ... without even knowing what his new masters are going to do to turn this around


I think Sir John has had his arm twisted by the 60c offer price being in the middle of the Grant Samuel valuation range. My scepticisim of the valuation stems from the fact that it is only a partial takeover. 60c might be a fair price but what Sir John doesn't say is that shareholders who accept will likely have 60% of the shares they tender returned to them. With the takeover premium removed as the market trades on, those remaining shares are only going to be worth around 47c each at best by my calculations.

Than means the real value of the takeover bid for shareholders is only:

0.4x60c + 0.6x47c = 52c

This is below the valuation range regarded as fair by Grant Samuel. Thus directors should have said the Agria share offer should be rejected as being too low.

SNOOPY

[mouse]

I agree with Snoopy. The real bid, for control, is only 52cents for shareholders. I think I have to sell into this offer though since I can at least get 60cents for 40% of my 10,000 shares. If it was a full takeover I might not sell. But this offer leaves me with little option.
Page 53 of the 'Target Company Statement' tells us that Mr Liu Yonghao is vice Chairman of MinSheng Bank. New Hope is the largest shareholder in MinSheng Bank, Chinas seventh largest commercial bank.
Further, page 53 again, Mr Liu is also a member of the Chinese Peoples Political Consultative Conference economic committee. Crony Capitalism.
So there is a convergence between business and politics in China. They are using their wealth to take over target companies around the world. We hand over our cash to Govt and thus have little personal savings. Due to high taxes and low wages.
Unless we take the matter seriously we will have New Zealand companies helping to develop China and not giving sufficient attention to NZ and Oz.
Further, PGGWrightson employs over 2,000 people. Many in Kiwi land. If they get thrown out of work the Kiwi taxpayer picks up the cost once they run out of cash.

[Balance]

I agree with Snoopy. The real bid, for control, is only 52cents for shareholders. I think I have to sell into this offer though since I can at least get 60cents for 40% of my 10,000 shares. If it was a full takeover I might not sell. But this offer leaves me with little option.
Page 53 of the 'Target Company Statement' tells us that Mr Liu Yonghao is vice Chairman of MinSheng Bank. New Hope is the largest shareholder in MinSheng Bank, Chinas seventh largest commercial bank.
Further, page 53 again, Mr Liu is also a member of the Chinese Peoples Political Consultative Conference economic committee. Crony Capitalism.
So there is a convergence between business and politics in China. They are using their wealth to take over target companies around the world. We hand over our cash to Govt and thus have little personal savings. Due to high taxes and low wages.
Unless we take the matter seriously we will have New Zealand companies helping to develop China and not giving sufficient attention to NZ and Oz.
Further, PGGWrightson employs over 2,000 people. Many in Kiwi land. If they get thrown out of work the Kiwi taxpayer picks up the cost once they run out of cash.

Farmers in NZ have borrowed $46 billion against their farms. Just 1% of that money will buy control of PGW.

What does that tell us about the mindset and mentality of the farming sector?

[mouse]

Farmers in NZ have borrowed $46 billion against their farms. Just 1% of that money will buy control of PGW.

What does that tell us about the mindset and mentality of the farming sector?
Exactly Balance. People are putting cash into farms etc and allowing a prime NZ agricultural company to be swallowed by an overseas company. At the end of it, the taxpayer will have to put up the cash to do real research into NZ farming needs. Which at present is being paid for by companies such as PGGWrightson.

[RRR]

Quote : Crony Capitalism.
So there is a convergence between business and politics in China.

No surprises there and practiced by every country around the world.

Quote : They are using their wealth to take over target companies around the world.

That is capitalism. It is now the turn of China unfortunately and they have cash. China is communist only for name sake-they follow capitalistic/totalitarian principle.

Quote : We hand over our cash to Govt and thus have little personal savings. Due to high taxes and low wages.

I am really confused. You are saying NZ taxes are high, but in your previous comment you said you want to see the taxes raised to 50%! I dont think NZ wages are that low-it is just relative and depends on who you compare with. Some beneficiaries even travel around the world using unemployment benefits only!

I am just contesting the facts you detailed, but I think they are based on just your assumption.

[mouse]

RRR, I am not saying taxes should rise to 50%, I think they are at that level now! If our taxes rise, including rates, motor vehicles etc, we would be paying more than 50%. Most unpleasant.
Our brand of capitalism should be robust enough to prevent farmland and iconic companies falling into the control of overseas buyers. It is only hapening with PGGWrightson because they went broke and are lost in the fog of restructuring. A sort of commercial blind mans bluff. We dont know where the prize is.
So in this situation of course we are able to be tripped up. Having a blindfold on is no fun. But it does not mean we should surrender control of our iconic companies.

[Balance]

RRR, I am not saying taxes should rise to 50%, I think they are at that level now! If our taxes rise, including rates, motor vehicles etc, we would be paying more than 50%. Most unpleasant.
Our brand of capitalism should be robust enough to prevent farmland and iconic companies falling into the control of overseas buyers. It is only hapening with PGGWrightson because they went broke and are lost in the fog of restructuring. A sort of commercial blind mans bluff. We dont know where the prize is.
So in this situation of course we are able to be tripped up. Having a blindfold on is no fun. But it does not mean we should surrender control of our iconic companies.

New Zealanders choose to borrow billions from overseas to support current level of living - cars, houses, TVs, travel etc.

Something has to give.

[simla]

Offshore finance is needed because NZers are not investing enough onshore. Of course, NZ shareholders could organise to keep ownership of NZ companies onshore too. If 10,000 investors put up $50,000 each into an "Association of New Zealanders Investing into New Zealand", that half billion could be used to slowly build up stakes in strategic companies. Such an association would have to use its firepower very carefully, not scatter it all around like diversified funds are obliged to do. The objective would have to be building cornerstone stakes, not trading for short term profits. And if those investors agreed to limited rights of withdrawal, and reinvestment of most of the dividends, things might be achieved over time. It would only work if the constitution was scrupulously fair and honest, so the funds or control could not be hijacked later for other use than looking to NZ's long term interests, which would take quite some thought. But, as a comparison of scale, if even 100 people from these forums put up $10,000 each, that would only create $1 million, which is no use. So I have no idea how such a group of investors might be put together, nor if that much money is available to be pledged to such a use. It would need someone to step forward, hold up a flag, and see what interest it attracted. Could be a pretty useful investment over time, too.

[shasta]

New Zealanders choose to borrow billions from overseas to support current level of living - cars, houses, TVs, travel etc.

Something has to give.

Yup $300m a week we are borrowing to fund our over bloated public sector & Govt spending (good ol Labour for increasing the number of bureaucrats, the only growth they obtained in 9 years)

We are "westernized" which means like parts of Europe & the USA we are a credit dependant society, & it showed when the property sector crashed leaving all the highly leveraged dead in the water.

We need to look to Australia & start saving, if we are to save the likes of PGW, we should have NZ based kiwisaver funds buying into such companies every quarter.

We cant keep looking to Nanny state Govt to tell us what to do & save for us, the superannuation has probably another 10 years left, so we have to do it ourselves.

National stepped in & saved South Canterbury Finance with $1.8b, but that had wider implications if they didnt act, so would they save PGW just cos they are debt heavy & have fundamentally failed to deliver?

Why is it considered treasonist for Chinese to buy into NZ, when Japan has been buying out Govt bonds & getting good interest etc, or Americans have been buying property for many years. I didnt see the greenies & socialists protesting about them, so are we just ignorant racists, when we should be bloody grateful?

Without foreign investment we would be exactly where Zimbabwe is now, remember when they were the "food bowl" of Africa?

Norgate & RPI had too much debt when buying into Wrightsons & RPI were heavily dependent on the Wrightson dividend to cover there lending costs

Time the hard questions were asked about how PGW was run, & not about Chinese investment

All the Govt can really do is a like for like policy with China, meaning they cannot outright own the land, but i suspect the FTA wont allow it!

[Balance]

The market has been trading a bit higher suggesting the split is more like 50/50. That said, the headline 60c offer is really just a ruse to fool the average shareholders. Seems tho it fooled GS as well. Pretty sad. A calc I used for an Agria point of view was Agria's current 20% at market plus the additional 30% ...

0.4x52c + 0.6x60c = 56.8c

... Which from a Agria point of view puts it above the GS 53c bottom but well below the 65c.

Like your view better Snoopy. Not interested in selling into such a low ball offer that gives Agria full control at the bottom of the cycle just when farmers are beginning to focus on ramping up production.

You are exactly right - PGW's fortunes will ultimately mirror that of NZ's agricultural sector. It is now trading at a cyclical low in terms of share price but ever increasing commodity prices will ultimately feed through to increased farm spending. The farmers cannot defer spending forever.

Read Fran O'Sullivan's article very carefully - the seeds business alone is worth PGW's market cap today.

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10704960

[Newman]

Generally speaking, the main purpose of investment is to make money. As an investor, you need care about the relative merits/disadvantages of selling PGW shares to Agria or retaining the shares.

If Sir Anderson cannot make a diference to PGW it is probably the time to sell it. Do not blame the Government for not rescuing PGW, and do not blame Chinese for buying PGW (by the way, Agria is a Singaporean-controlled company, not a Chinese one). Those who want to keep PGW a pure NZ company should open their wallets, rather than making useless, emotional statements. Emotional people are unlike become successful investors.

Unless an alternative bidder joins the the war Agria would have no difficulty in increasing its share holding to 50.01% because PGC has agreed to sell it 18% holding.

[Snoopy]

I agree with Snoopy. The real bid, for control, is only 52cents for shareholders. I think I have to sell into this offer though since I can at least get 60cents for 40% of my 10,000 shares. If it was a full takeover I might not sell. But this offer leaves me with little option.


I agree with you Mouse. Unfortunately not selling looks like cutting off our noses to spite our faces on this one.



Page 53 of the 'Target Company Statement' tells us that Mr Liu Yonghao is vice Chairman of MinSheng Bank. New Hope is the largest shareholder in MinSheng Bank, Chinas seventh largest commercial bank.
Further, page 53 again, Mr Liu is also a member of the Chinese Peoples Political Consultative Conference economic committee. Crony Capitalism.
So there is a convergence between business and politics in China.

OK thanks for that, but let's be clear. New Hope is a substantial business arm of the Chinese Government. Agria is the private playgroind of Alan Lai. Agria and New Hope are not the same thing!

SNOOPY

[mouse]

Balance, thanks for the link.
Newman, people who own PGGWrightson shares have little alternative, in my view, to accepting the offer. That is the 'investor' view. But I can also have a view as a Kiwi. That view is the sale to Chinese interests could seriously deflect the PGGWrightson research from NZ to China. Which will cost us Kiwis a packet.

[thishastowork]

there goes second takeover offer

http://www.directbroking.co.nz/directtrade/dynamic/announcement.aspx?id=2731872

[Balance]

I've flogged most of mine off at 59 cents on market. Can't see the point of holding on in the hope of a higher bid and risking having to sell a third at 60 cents and watch the remainder wallow after the bid.

Well done!

[winner69]

Belg .... do you think that Agrium actually carried out due diligence ..... doesn't say they actually did before deciding for reasons 'specific to them' for not proceeding with an offer

Maybe they did the due diligence and came to the conclusion that PGW is (as you told me off for saying so) well and truely f###ed and beyond redemption and not worth buying

A cyclical play in a cyclical market you say but but if well and truely f###ed cycles don't really matter to PGW as it lurches from one disaster to another .... like even when things were pretty good a while ago they didn't do that well.

[Jaa]

Belg .... do you think that Agrium actually carried out due diligence ..... doesn't say they actually did before deciding for reasons 'specific to them' for not proceeding with an offer

Maybe they did the due diligence and came to the conclusion that PGW is (as you told me off for saying so) well and truely f###ed and beyond redemption and not worth buying

Maybe a deal has been done?

Seeds/Ag Tech -> Agria

Stores -> Agrium

Finance -> BSH (via PGC)

You could argue that Agrium would also like the finance part but as PGC have the shares Agria would have to negotiate with them first.

[mikew]

Zuellig emerges as potential new bidder for PGG Wrightson
By Paul McBeth

Feb. 25 (BusinessDesk) – Zuellig Group, the owner of local tractor distributor CB Norton Distributers Ltd., has emerged as a potential new bidder for a stake in rural services company PGG Wrightson Ltd.

The Hong Kong-based investment company, which also owns shares in Pharmacybrands Ltd., is keen on boosting its agricultural interests in New Zealand and sees Wrightson as having “strong opportunities to add value,” according to senior group executive Peter Williams.

http://www.scoop.co.nz/stories/BU1102/S00640/zuellig-emerges-as-potential-new-bidder-for-pgg-wrightson.htm

[Xerof]

Finance -> BSH (via PGC)



hearing via loose lips, that there's a bit of trouble 't mill with PGG Finance - so don't rely on George or Jeffrey to pick it up without a deep discount, if at all.

seems last years 4 dog loans has become 70+

that is consistent with the sort of deterioration seen by most other finance coys.

The regional lending managers, who initated these loans, and should know the file intimately, are usually the most reticent when it comes to admitting a problem with 'their' client, often conning auditors for at least one round.....

good luck with that

[rabcat]

Zuellig emerges as potential new bidder for PGG Wrightson
By Paul McBeth

Feb. 25 (BusinessDesk) – Zuellig Group, the owner of local tractor distributor CB Norton Distributers Ltd., has emerged as a potential new bidder for a stake in rural services company PGG Wrightson Ltd.

The Hong Kong-based investment company, which also owns shares in Pharmacybrands Ltd., is keen on boosting its agricultural interests in New Zealand and sees Wrightson as having “strong opportunities to add value,” according to senior group executive Peter Williams.

http://www.scoop.co.nz/stories/BU1102/S00640/zuellig-emerges-as-potential-new-bidder-for-pgg-wrightson.htm

This is an interesting development! This company has a turnover of over $12B/year , employs over 10,000 people across the asia pacific region. It would look like they could buy PGW out of their loose change.
Lets hope they make a decent offer for the company.

[root]

The article goes on to say ...

Williams said Agria’s bid came from a “Chinese-based company with little experience in New Zealand.”

Fighting talk indeed. This could be fun ... [evil grin]


What I read there is that any competing bid would be a similar price but share holders should accept any future Zuellig Group offer on the basis of better local market knowledge. We'll see.

[Balance]

The article goes on to say ...

Williams said Agria’s bid came from a “Chinese-based company with little experience in New Zealand.”

Fighting talk indeed. This could be fun ... [evil grin]

According to NZPA, PGGW just confirmed that Zuellig has approached the company with its buying interest. So there you go, Belg-me-ole-mate.

[geezy]

i dont see any official announcement by PGW yet.

[winner69]

i dont see any official announcement by PGW yet.

Obviously haven't had the phone call yet so nothing to disclose

[mikew]

http://www.stuff.co.nz/business/farming/4725342/Zuellig-considers-bid-for-PGGW-stake

Hong Kong based conglomerate Zuellig Group is considering a partial takeover of rural services company PGG Wrightson in partnership with a New Zealand investor.

[mikew]

Still nothing announced to market tho ...

Be patient.............

[elZorro]

Be patient.............

Zuellig Group is one big outfit with 12 billion turnover p.a. They sold off Zuellig Pharma China for $470 mill recently. As far as I know they are a powerhouse in Auckland, supplying chemists, hospitals etc on urgent basis with a very organised system, lots of computer hardware behind it all, for logistics. So I'm keen to see further interest in PGW from them.

http://www.zuellig.com/

[mikew]

PGW
03/03/2011 10:21
GENERAL

REL: 1021 HRS PGG Wrightson Limited

GENERAL: PGW: PGG Wrightson Takeover Clarification

PGG Wrightson Takeover Clarification

There has been some media comment in recent days suggesting that a further
takeover bid has been received by PGG Wrightson. Given that this is not
accurate, PGG Wrightson wishes to provide clarification.

Hong Kong based investment company; Zuellig Group issued a press release last
week noting that it was "...looking at a number of options for investment in
PGG Wrightson, including potentially a strong cornerstone shareholding
position." While PGG Wrightson has received initial contact from Zuellig, no
meeting to discuss the nature of Zuellig's interest has yet been held.

At the present time PGG Wrightson is not aware of the nature of Zuellig's
interest beyond what has been stated in the media. PGG Wrightson has not
received notification of an intention by Zuellig to lodge a formal takeover
offer. PGG Wrightson will however make an appropriate announcement if
circumstances should change.

Definitely this is not the one you been waiting for, next one will be the good one.

[Blendy]

waiting eagerly for the next one :)

[geezy]

I will be out if the next offer comes in, :) come on make me eat my words!

[mikew]

Zuellig Group will lose their face if they can't make an offer. or NZer don't have ability to stop controlling bid from agria.

[Balance]

Zuellig Group will lose their face if they can't make an offer. or NZer don't have ability to stop controlling bid from agria.

Looks like they are getting their funding together.

http://www.latimes.com/entertainment/sns-rt-arts-us-finearts-chitre7222rx-20110303,0,6563860.story

Simply by selling a few old vases!

[mikew]

Looks like they are getting their funding together.

http://www.latimes.com/entertainment/sns-rt-arts-us-finearts-chitre7222rx-20110303,0,6563860.story

Simply by selling a few old vases!

Just one old Chinese ceramics could buy whole PGGW:)

[Balance]

Interesting - someone just came in and took out all the 52c on the offer. Zuellig and PGGW met on Friday so announcement coming?

[Balance]

Still no announcement .... Zuellig "bid" is looking increasingly like hot air.

Afraid so.

Will blow their credibility to do other deals in future if they do not follow through.

[mikew]

Zuellig Group will lose their face if they can't make an offer.


Afraid so.

Will blow their credibility to do other deals in future if they do not follow through.

Exactly I mean.But good thing takes time.

[mikew]

http://www.bworldonline.com/content.php?title=Zuellig%20Group%20planning%20to% 20enter%20corn%20production&id=27513

Zuellig Group is planning to enter massive corn production amid surging commodity prices in Philippines. PGGW seeds business could be very important for them.

[Balance]

According to NBR, ball is now in PGW's court - the discussions have taken place.

Watch the sp today - it was very telling to see buyer(s) mopped up all the stock at 51c and 52c in the last few days. What do they know?

[mikew]

According to NBR, ball is now in PGW's court - the discussions have taken place.

Zuellig need a permission of pgw to make a bid? Seems like Zuelling going to eat their words.

[iceman]

Can someone explain why a large number of trades in PGW today are for 1,417 shares each ? Looks odd !

[winner69]

$750 is or was the maximum amount that companies could could offer employees shares under a staff share scheme to get full tax benefits for the staff.

Maybe this is reason but one would have thought that there would be a more efficient way to to buy the required number of shares .... or maybe they have been held for the 3 years and the staff want their money and the trustee is selling them on market one lot at a time

Honestly I don't know

[mikew]

Honestly I don't know

Seems like you know every thing w69;)

[iceman]

Thanks Winner. That probably explains it.


$750 is or was the maximum amount that companies could could offer employees shares under a staff share scheme to get full tax benefits for the staff.

Maybe this is reason but one would have thought that there would be a more efficient way to to buy the required number of shares .... or maybe they have been held for the 3 years and the staff want their money and the trustee is selling them on market one lot at a time

Honestly I don't know

[Voltaire]

It may be the trustee, but I hope not.

The trades are roughly every 15 minutes. What are they doing in between?:
having cups of tea?
filling out their 15-minute minimum-charge sheets?

I wonder if we're seeing a bot at work. FPA has something similar going on, though with less volume - it's only fired up in the last couple of hours.

[KS]

Other companies have also regular quantities going through at intervals of about 15 minutes:
AIA 2013
CEN 705
NZO 1548

[Snoopy]

Agria's offer closes on the 15th April (unless extended). Plenty of time yet. Even an offer of 61c would be enough to make all existing acceptances null and void.

Huh? I think you will find if you accept the Agria offer, you can't pull out if another higher offer comes along. That is why directors recommended waiting until the last minute to accept the Agria proposal, in case such a higher offer comes along.

SNOOPY

[mikew]

Huh? I think you will find if you accept the Agria offer, you can't pull out if another higher offer comes along. That is why directors recommended waiting until the last minute to accept the Agria proposal, in case such a higher offer comes along.

SNOOPY

You can pull out agria offer if:

1. agria offer failed; and
2. higher offer close date is behind agria close date.

[iceman]

I am not sure about that mikew. It seems clear to me after reading the offer document, that an acceptance of the Agria offer "constitutes a contract between the Acceptor and Agria" and the only way out for the Acceptor, is if Agria fails to reach the 50.01% and the offer thereby terminated or if Agria fails to pay in full within 7 days of the offer becoming unconditional. I am certainly waiting until as close to 15 April as possible before doing anything in relation to this offer.


You can pull out agria offer if:

1. agria offer failed; and
2. higher offer close date is behind agria close date.

[mikew]

A higher offer will fail agria offer except agria make another much higher offer.

[Balance]

A higher offer will fail agria offer except agria make another much higher offer.

Agreed.

Zuellig and PGW both playing games. One is much much bigger than the other. I know where I will place my bets.

[corlemar]

does seem to be any fresh approach coming....all hot air. Agria have to be close to the 50.01% they need !

[mikew]

Agreed.

Zuellig and PGW both playing games. One is much much bigger than the other. I know where I will place my bets.

I am sure pgw board now know the outcome and leave shareholders in the dark.

[Blendy]

i'm fairly new at this, so apologies if this is a dumb question. Why is Agria not buying up all the shares for sale at the moment for well under their 60c offer? Surely they'd be able to pick up a lot and save some money, and once they reach their 50.01%, they can quit, or when April 15 comes, they can buy the balance they need for 60c?

[iceman]

Agreed, IF alternative offer is received soon. The longer there is no other offer, the more likely it is Agria will achieve their goal, quite possibly well before close of offer date. If higher offer received after that, then no way out for those accepting the Agria bid.


A higher offer will fail agria offer except agria make another much higher offer.

[Snoopy]

Why is Agria not buying up all the shares for sale at the moment for well under their 60c offer? Surely they'd be able to pick up a lot and save some money, and once they reach their 50.01%, they can quit, or when April 15 comes, they can buy the balance they need for 60c?

Once any shareholder reaches the 20% threshold the NZ takeovers code is invoked. This means that all other remaining shareholders must be treated equally as regards any further share acquisitions. If Agria just bought on market the equal treatment of remaining shareholders would not happen. Agria is required to launch a partial takeover to ensure that all remaining shareholders have equal opportunity to accept in proportion to their own holdings.

SNOOPY

[Blendy]

thanks for that Snoopy :)

[mikew]

PGW already have a patial take over on the table, how will the Zuellig 19.9% shareholder working? maybe $1.5 per share.

[iceman]

Zuellig indicated they were sending executives to NZ to discuss a potential joint offer with other interested NZ parties/companies (didn't name any), presumably to be able to make an offer for a controlling shareholding


PGW already have a patial take over on the table, how will the Zuellig 19.9% shareholder working? maybe $1.5 per share.

[Balance]

Zuellig has its eyes on some of PGW's assets - that's what this bs is about. Playing the nationalistic card of "we will work with other NZ entities to keep majority ownership of iconic company in NZ."

Simple message for Zuellig - just show us the money! Otherwise, bugger off back to HK.

[mikew]

Simple message for Zuellig - just show us the money! Otherwise, bugger off back to HK.

Agreed, as simple as that.

[corlemar]

Perhaps I'm missing something here, but from what I gather Zuellig have said they are looking to take a cornerstone holding of 19.9% - if that is the case, how does that affect the current offer of Agria taking 50.01% ?? To me it doesn't change anything........is not conceivable that both parties could obtain the shareholding they desire ?? Or is Zuellig after 19.9% and looking for other interested parties to take a shareholding representing a further 30.11% to take a majority and effectively knock Agria out of the game ?? To me it appears a lot of hot air still, though if they are serious then the clock is ticking and 15 April appraoching rather quickly....

[mikew]

Perhaps I'm missing something here, but from what I gather Zuellig have said they are looking to take a cornerstone holding of 19.9% - if that is the case, how does that affect the current offer of Agria taking 50.01% ??

Zuellig also said they will walk away if agria bid succeed.

[iceman]

Absolutely agree Balance and the time is running out for them to do so


Zuellig has its eyes on some of PGW's assets - that's what this bs is about. Playing the nationalistic card of "we will work with other NZ entities to keep majority ownership of iconic company in NZ."

Simple message for Zuellig - just show us the money! Otherwise, bugger off back to HK.

[elZorro]

Zuellig has its eyes on some of PGW's assets - that's what this bs is about. Playing the nationalistic card of "we will work with other NZ entities to keep majority ownership of iconic company in NZ."

Simple message for Zuellig - just show us the money! Otherwise, bugger off back to HK.

Hi Balance, do you mean the seeds business? That seems to be profitable, and have some links to their other enterprises. Can someone please explain why PGW is sitting below the Agria offer of 60c? Normally a share would respond with a higher price than the offer. That just says "down in the dumps company" to anyone who is looking.

The 2010 annual report shows a 70mill EBITDA and just $23mill after tax profit on over a billion of turnover. 2% NP, that's terrible isn't it? They are not risking manufacture or much R&D, just selling on for the most part. I know the margins are tight, but from my experience PGW's store customers must be having trouble too. They are not generally dairy farmers. When they go into the stores, it's often to send something back for repair, not to buy something new. But that is just my opinion, from store sales of a product that mainly suits dairy farmers.

[mikew]

Zuellig Disappointed by PGG Wrightson Rejection
http://www.scoop.co.nz/stories/BU1103/S00505/zuellig-disappointed-by-pgg-wrightson-rejection.htm

Zuellig just played a exaggerated comedy with ungraceful exit.Totally Rubbish.

[elZorro]

Zuellig Disappointed by PGG Wrightson Rejection
http://www.scoop.co.nz/stories/BU1103/S00505/zuellig-disappointed-by-pgg-wrightson-rejection.htm

Zuellig just played a exaggerated comedy with ungraceful exit.Totally Rubbish.

Thanks Mikew, hadn't seen that. But Zuellig's comments there look sound to me. They could certainly help with merchandising experience, and they seem to have a good understanding of the PGW business background. They are a big company, they can afford to be choosy, and have made their intentions known. PGW isn't in that happy position, and have no great business acumen, if the last few years are any indication.

From one of the privately-owned Zuellig Group's web pages:



A century after Frederick Zuellig first arrived in Manila, the business he took over and his sons rebuilt and nurtured has become a regional business giant far beyond his expectations. Nevertheless, the core values of honesty and reliability, upon which he built his business, remain at the heart of The Zuellig Group. These principles, along with prudent financial practices and an unusually high degree of staff loyalty, have been key factors in the remarkable resilience and growth of the group. Originated as one of the many European trading houses in Asia, The Zuellig Group grows into a successful business group in the world. A business that was initially run by one man, and then revived and transformed by his sons, is today expertly run by professional managers who recognise that it is the core values of the Zuellig family that form the foundations for the business as they seek to strengthen and expand it even further into the 21st century.

Zuellig turnover of $12billion p.a., compare that to Agria with a fairly modest Mcap, and this sort of a chart, pictured below. While the takeover offer helped Agria's chart for a while, it's flatlining like PGW.

[iceman]

Hi ElZorro. This Zuellig play was obviously just a very disappointing and simple stunt, with the only aim being to upset the Agria (and New Hope don't forget, they are big) offer, for one reason or another. Zuellig have damaged their name and reputation in NZ by this stupid stunt. In reply to your earlier question about why PGW is sitting below the Agria offer on the market, it is because Agria is only offering to buy 50.01% of the company and already have about 12%, so only need another 38 odd percent. So if we assume everybody accepts to sell all their shares, Agria will only buy 38% of everyobody. That means we (the current shareholders) will be left with 62% of our shares and the market is obviously not valuing that very highly. I am slightly overweight in PGW and am happy to sell 38% of my shares to Agria at 60c and then go along for the ride. A bit risky I know, but can not imagine it being a worse ride than what we could expect under current management, which have blown around 75% of the shareholder value with their incompetency over the last 3 years. I think Agria will quickly sell the finance business, reduce debt and then take us in leaps and bounds with our seeds business into China/Asia. Bring it on !


Thanks Mikew, hadn't seen that. But Zuellig's comments there look sound to me. They could certainly help with merchandising experience, and they seem to have a good understanding of the PGW business background. They are a big company, they can afford to be choosy, and have made their intentions known. PGW isn't in that happy position, and have no great business acumen, if the last few years are any indication.

From one of the privately-owned Zuellig Group's web pages:



Zuellig turnover of $12billion p.a., compare that to Agria with a fairly modest Mcap, and this sort of a chart, pictured below. While the takeover offer helped Agria's chart for a while, it's flatlining like PGW.

[mikew]

I think Agria will quickly sell the finance business, reduce debt and then take us in leaps and bounds with our seeds business into China/Asia. Bring it on !

I have same hope as you iceman. china has a huge market.

[RazorX]

Just reading this article on the NZX:

"PGG Wrightson rose 2 per cent to 51 cents after independent directors at the rural services company said they could not recommend a partial takeover offer from Zuellig Group, following an update from the investment company on its intentions failed to provide any price information."

[elZorro]

Just reading this article on the NZX:

"PGG Wrightson rose 2 per cent to 51 cents after independent directors at the rural services company said they could not recommend a partial takeover offer from Zuellig Group, following an update from the investment company on its intentions failed to provide any price information."

Well, why didn't PGW ask for more details quietly, instead of putting out a press release about it? I don't think Zuellig will be the ones with a poor reputation.

http://www.zuellig.com/images/pdf/Zuellig_Lieberman_MA_RElease_(E)_Final_Australia.p df

[winner69]

Zuellig seem a pretty switched on outfit eh .... wonder if PGW treated them with disdain?

[geezy]

Maybe Agria got the board some nice gifts :P hehe

[corlemar]

Clearly PGG Wrightson have something that Zuellig wanted. My question if anyone can answer, is why given the size of Zuellig would they not just make an offer outright for PGW or at least match Agria ?? From a cost perspective it wouldn't dent their sizable balance sheet. They mentioned I believe that they had ambitions and the skills to turn the company around......so why then say we'll take 19.9% - maybe the current directors will fair better under Agria than under Zuellig, wotever the case it seems to me that one party isn't quite telling the full story, yet !

[mikew]

Agria deal still waiting for approval of OIO, so situation is uncertain.

[Football Predictor]

Belgarion, I think you will find the offer is open to all shareholders at the record date. Apparently sellers should forward on the documentation to new buyers, but this doesn't happen much. If you bought post 17 January then contact the registrar and request the docs.

[Voltaire]

Belgarion, I think you will find the offer is open to all shareholders at the record date. Apparently sellers should forward on the documentation to new buyers, but this doesn't happen much. If you bought post 17 January then contact the registrar and request the docs.

That is correct - from the National Bank Share & Bond trading site:

"PGW - If you have purchased PGW since the 10th of January 2011 or are in the process of purchasing PGW shares and wish to be informed of the Agria Corporation takeover offer please contact Computershare Investor Services on 09 4888700 who are able to provide you with the offer documents. The current closing date for the offer is 15 April 2011."

[corlemar]

That is correct - from the National Bank Share & Bond trading site:

"PGW - If you have purchased PGW since the 10th of January 2011 or are in the process of purchasing PGW shares and wish to be informed of the Agria Corporation takeover offer please contact Computershare Investor Services on 09 4888700 who are able to provide you with the offer documents. The current closing date for the offer is 15 April 2011."

To me it would seen Belgarion is right - surely there would've been a cut off point, otherwise wouldn't everyone be buying PGW now at $0.49 knowing a good deal of their shares will be picked up for $0.60 by Agria.

[geezy]

Agria deal still waiting for approval of OIO, so situation is uncertain.

Do u need one even tho its a partial take over?

[winner69]

Do u need one even tho its a partial take over?

Spose so as they have applied to the OIO

[Voltaire]

To me it would seen Belgarion is right - surely there would've been a cut off point, otherwise wouldn't everyone be buying PGW now at $0.49 knowing a good deal of their shares will be picked up for $0.60 by Agria.

No. The total number of shares on issue hasn't changed - the issue of who owns them (Agria aside) isn't material. Under the scenario you are painting all shares that have changed ownership are excluded from the offer, suggesting, at an extreme, that the offer might fail because not enough shares remained in the hands of their original owners to be available for sale!

The current sp is low, presumably, because people either doubt the offer will proceed and/or don't want to be stuck with the remainder of the shares not taken up by Agria as the rush for the exit begins.

[iceman]

My reading of the offer document supports Voltaire's view. You can buy now at 49c and sell 38.3% of it back to Agria as long a you accept prior to April 15. So there are some that obviously believe the share price will crash further after (if) Agria completes this partial takeover, have lost their nerve and are bailing out.


Or maybe the sp is low because people are confused as to whether, if they buy now, they can accept the Agria offer? ... If what is being said is correct and you can buy at 49 cents and accept the Agria offer then PGW is a real steal at 49 cents. (I.e. PGW is worth more than 49 cents IMHO and buying a percentage at 49 to sell the same % at 60 is just jam!)

[Football Predictor]

In effect, if you tender all your shares at 60 cents you will sell c 40% and be left with 60%. The effective ex price works out to be around 4 cents less than current market price. In other words, if PGW is at 50 cents, the market is implying that the price post takeover will be 46 cents.

[Football Predictor]

"mr market is aways right" - so they say. On the one hand, Agria are buying on depressed earnings and they are on the board so they know what its worth - ie. north of 60 cents - so markets wrong.

On the other hand, Agrium had a look and walked away, Zuellig conducted the most riduiculous "corporate action" I have ever seen (apart from PGC stupidly going into lockup with Agria) and then walked away, both thse guys found it too hard and/or something in PGW stinks and its not worth 60 cents.

As for me - over time its definitely worth more than 60 cents with good management and a strong board - but stay as a minority in an offshore controlled board and maybe get more ripped off over time? A hard call!

[Football Predictor]

who do you trust more? :)

(Unfortunately) I suspect will have to tender the lot at 60 and then run with the 60% I get back

[corlemar]

"mr market is aways right" - so they say. On the one hand, Agria are buying on depressed earnings and they are on the board so they know what its worth - ie. north of 60 cents - so markets wrong.

On the other hand, Agrium had a look and walked away, Zuellig conducted the most riduiculous "corporate action" I have ever seen (apart from PGC stupidly going into lockup with Agria) and then walked away, both thse guys found it too hard and/or something in PGW stinks and its not worth 60 cents.

As for me - over time its definitely worth more than 60 cents with good management and a strong board - but stay as a minority in an offshore controlled board and maybe get more ripped off over time? A hard call!

Can anyone answer why Agria don't take full control of PGW if they believe it is worth north of $0.60 - what is the rationale other than a controlling stake by taking 50.01%

[Football Predictor]

perhaps because they dont want it all, they only want the Seeds business, so at 50% perhaps they sell off the non-core parts (to them) that they don't want (eg. Merchandising and Finance) to people who will pay up for them and get cashback, rather than have to lay out the cash now for the whole thing and then end up with a problem if noone else wants those parts they don't or if they were seen as a 'weak' seller and thus get lowballed.

the darker view is that at 50% they control it so could strip off / divert the seeds technology / business to other entities offshore? - so getting what they want for half price?

[Football Predictor]

in the immortal words of Gordon Gekko, "it's a dog with fleas"

[corlemar]

perhaps because they dont want it all, they only want the Seeds business, so at 50% perhaps they sell off the non-core parts (to them) that they don't want (eg. Merchandising and Finance) to people who will pay up for them and get cashback, rather than have to lay out the cash now for the whole thing and then end up with a problem if noone else wants those parts they don't or if they were seen as a 'weak' seller and thus get lowballed.

the darker view is that at 50% they control it so could strip off / divert the seeds technology / business to other entities offshore? - so getting what they want for half price?

Apologies for dragging this out further, but if as you suggest a possibility is for Agria to strip parts of the business they do or don't want. Then the existing board would see right through this would they not, and hence recommend the shareholders rebuff the Agria offer. In short why are the existing board recommending shareholders approve this offer - does this lack vision, direction of their own capabilities ?

[Xerof]

I think Gordon Gekko has it covered..........but it stands in fine company across Australasia, with the likes of Allied and Elders to name but two more superstars

[Football Predictor]

corlemar - call me cynical but I always try and think what could be the downside. What I mean is things could happen once they've got control. They don't have to be blatant. What would the NZ-led board do? If they don't like it, and Agria doing nothing illegal, all they could do is resign. At which point the stock goes into trrading halt and opens up x% lower.

I do think the board is very weak for a number of reasons. The hope - apart from a higher offer - is that PGW earnings are currently at low point of cycle so should improve over time unless management stuffs it up and Agria might be far more ruthless and efficient than the existing management. The upside of course is that fears could be unfounded - it could be a "match made in heaven" opening up Chinese market to PGW.

Very interesting all-up that Agria who knows the company is taking control on the cheap but others with experience - Agrium/Zuellig - have walked away. Someone's going to be right - I hope its Agrium!

you seen any broker research on PGW?

[Football Predictor]

I mean I hope its Agria - not Agrium

[corlemar]

corlemar - call me cynical but I always try and think what could be the downside. What I mean is things could happen once they've got control. They don't have to be blatant. What would the NZ-led board do? If they don't like it, and Agria doing nothing illegal, all they could do is resign. At which point the stock goes into trrading halt and opens up x% lower.

I do think the board is very weak for a number of reasons. The hope - apart from a higher offer - is that PGW earnings are currently at low point of cycle so should improve over time unless management stuffs it up and Agria might be far more ruthless and efficient than the existing management. The upside of course is that fears could be unfounded - it could be a "match made in heaven" opening up Chinese market to PGW.

Very interesting all-up that Agria who knows the company is taking control on the cheap but others with experience - Agrium/Zuellig - have walked away. Someone's going to be right - I hope its Agrium!

you seen any broker research on PGW?

Thx FP, I guess it's perhaps a wait and see and imo, i think that is most peoples view, seeing how the next few weeks unfold. I've not seen any broker research since prior to Xmas, so nothing new.

[Football Predictor]

Hmmmm, I see Agria has extended the period for the offer from April 15 to April 23. Obviously acceptances coming through are just a trickle. 8 more days for our White Knight to come riding through?

[mikew]

Could be approve of OIO will late?

[geezy]

I m sending mine in soon! The end of 8 more days will be a big disappointment to u football predictor .

[Football Predictor]

geezy - no disappointment - I dont see any white knight - the comment was just tongue in cheek!

[Glendoonie]

I am one of the fence-sitters. Given that I bought PGW at 64 cents in 2009 does anyone have any thoughts about my taking up Agria's offer of 60 cps before 23 April? I could be in the red up uo $400 if I do, but I don't need to hold a fire-sale.

Cheers, G

[iceman]

Agria have only received acceptance for 44.7% ! Starting to look unlikely they will reach their 50.01% by Friday.

[winner69]

Agria have only received acceptance for 44.7% ! Starting to look unlikely they will reach their 50.01% by Friday.

Have enxt week as well ... extended to April 23rd

They'll get what they want

[iceman]

You're right W69. I forgot the extension when I looked at my calendar this morning. Should have had another coffeee before posting !!


Have enxt week as well ... extended to April 23rd

They'll get what they want

[mikew]

From NBR content’’ PGG Wrightson bidder threatens government “, any thoughts?

[Winston]

I am trying to make a decision about the 'Agria" offer.

I suppose we have to assume now that they will get over 50% offered to them and I think I will accept the 60 cents.

If they were to be offered, say, 60% what proportion of my shares that I offer to them are they likely to buy?

I have to decide whether to offer all (about 60,000), some, or none.

I would appreciate any suggestions as to the best strategy this late in the game?

[iceman]

Could someone that has access to NBR online let us know what this is about please ? Can't find anything about this in other media.


From NBR content’’ PGG Wrightson bidder threatens government “, any thoughts?

[winner69]

Could someone that has access to NBR online let us know what this is about please ? Can't find anything about this in other media.

Mr Bridgemen would say it only costs $85 to get access ..

[mikew]

Anyone know if Agria got OIO approval? cheers

[winner69]

Anyone know if Agria got OIO approval? cheers

Apparently not yet ... thats what Mr Bridgeman was going on about ... pay the $85 to get the full story

[Glendoonie]

Sending in mine today.

[RazorX]

Yes, I must send mine in. It doesn't look like things will get too diluted at this stage - unless everyone else is thinking like us lol!

[winner69]

hearing via loose lips, that there's a bit of trouble 't mill with PGG Finance - so don't rely on George or Jeffrey to pick it up without a deep discount, if at all.

seems last years 4 dog loans has become 70+

that is consistent with the sort of deterioration seen by most other finance coys.

The regional lending managers, who initated these loans, and should know the file intimately, are usually the most reticent when it comes to admitting a problem with 'their' client, often conning auditors for at least one round.....

good luck with that

This post has stuck in my mind for a while now mate .... and when English was on the telly the other morning he started talking about the 4 remianing in the deposut guarantee scheme (Fisher & Paykel Finance, PGG Wrightson, the Wairarapa Building Society and Combined Building Society) and how the govt had an exposure of $1.7 billion to them and didn't looked too surprised when Guyon said the public would be a pissed off if another bailout was on the cards ... it was the context of 4 remianing .... government support ... are they toast when the scheme runs out .... and English not even saying he wasn't worried about them going bust isn't a positive sign

The alarm bells are ringing .... loudly

Here's the transcript ,,, and don't read between the lines



GUYON So why are we still doing it? In terms of the finance companies, I understand that we needed to guarantee the financial system, but why is it now that we still have four finance companies with exposure of $1.7 billion being accepted into a scheme as late as January 5 this year? Why are we still guaranteeing those finance companies well after the actual acute financial crisis is over?

BILL Well, there’s long lag times here, so we have the finance— the first deposit guarantee back in 2008. There was over 70 or 80 institutions in that guarantee. We’re now—

GUYON We know the history, but, Mr English, why are we still letting companies into this scheme?

BILL Well, we’re down to four or five companies now.

GUYON With exposure of 1.7 billion—

BILL That’s right.

GUYON …there won’t be a lot of appetite for the public to bail that out, will there?

BILL That’s right. It’s still not ideal. Bear in mind these companies were covered by the previous guarantee. When we’d been making these decisions on the way through, the focus has been on maintaining these companies so that they can work their way out of any issues they might have. Because the alternative to the guarantee— the only reason the guarantee’s there, cos the alternative’s worse, which would be the automatic collapse of those companies.

GUYON So is that the case for these four companies – Fisher & Paykel Finance, PGG Wrightson, the Wairarapa Building Society and Combined Building Society? I mean, without this guarantee, are they toast?

BILL Well, there’s certainly been times in the past when that was possible, where without the guarantee, their depositors could’ve just taken their money and run.

GUYON Isn’t this the idea of capitalism? I mean, I can understand when there was going to be a run-on at the banks, you have to do it. You did do it, Labour did it, you agreed it with it – fine. But why are we doing it now?

BILL Because we’ve seen it as the most prudent way of managing the guarantee out of the system. Bear in mind that in most other countries there’s deposit guarantees that apply all the time, such as Australia . Depositors there in their banks are covered by a guarantee at all times. We’ll be one of the few countries that’s actually found a way to work our way out of these kind of deposit guarantees that create obligations for taxpayers, and we will work our way out of it by the end of this year.

http://www.scoop.co.nz/stories/PO1104/S00130/guyon-espiner-interviews-finance-minister-bill-english.htm

[elZorro]

So, PGW are today saying (again) that we should sell (depending on our circumstances etc) as there is no other offer. Agria are slowly getting towards their threshold for takeover. Maybe it is all as shaky as you're suggesting, winner69.

[Lizard]

Winner,

Out of interest, I just had a look at PWF accounts to see how they stack up. On paper, would give them a reasonable chance of getting through the post-GG period, as their loan book is fairly short term. However, impairments and overdues look a bit messy and their "risk-sharing" agreement somehow reads as though they get to keep most of the risk, so perhaps they could yet come unstuck on loan quality. On the bright side, a larger proportion of their debentures were in the 1-2 yr bracket at 31 Dec than appears the case for CBS, so perhaps not all their holders are so concerned about security and maybe more investing for return and willing to ignore the loss of gg... interesting thought, that the higher risk/return niche could actually be less likely to experience a run on funds through end of the guarantee.

Overall though, would think they will need to downsize lending considerably over a 6-12 month period until they achieve proven survivor status...

[flyingmariner]

So I haven't received any offer documents in the mail. Can anyone suggest where, if possible I could either download them or ask for them to be mailed out? Thanks

[Balance]

Winner,

Out of interest, I just had a look at PWF accounts to see how they stack up. On paper, would give them a reasonable chance of getting through the post-GG period, as their loan book is fairly short term. However, impairments and overdues look a bit messy and their "risk-sharing" agreement somehow reads as though they get to keep most of the risk, so perhaps they could yet come unstuck on loan quality. On the bright side, a larger proportion of their debentures were in the 1-2 yr bracket at 31 Dec than appears the case for CBS, so perhaps not all their holders are so concerned about security and maybe more investing for return and willing to ignore the loss of gg... interesting thought, that the higher risk/return niche could actually be less likely to experience a run on funds through end of the guarantee.

Overall though, would think they will need to downsize lending considerably over a 6-12 month period until they achieve proven survivor status...

It will be sold.

[iceman]

You can download it here flyingmariner [URL="http://www.pggwrightson.co.nz/Userfiles/files/Market%20Announcements/2010/12/Partial%20Takeover%20Offer.pdf"]


So I haven't received any offer documents in the mail. Can anyone suggest where, if possible I could either download them or ask for them to be mailed out? Thanks

[Voltaire]

So I haven't received any offer documents in the mail. Can anyone suggest where, if possible I could either download them or ask for them to be mailed out? Thanks

If you contact Computershare they'll be able to email or post the forms to you.

Phone: +64 (9) 488 8700 (or go the website for email contact)

[Blendy]

so now that the threshold has been met, is it still worth sending in our forms, or is it over?

[iceman]

Still worth sending in Blendy if you want to sell. Agria will treat all shareholders the same and reduce all acceptances proportionally so they end up buying only the intended 50.01% .


so now that the threshold has been met, is it still worth sending in our forms, or is it over?

[iceman]

Agria has just announced they've received the OK from OIO. So the deal is done.

[mikew]

Agria has just announced they've received the OK from OIO. So the deal is done.

They also need to receive the OK from china authority before the deal is unconditional.

[Xerof]

they'll now get near 100% and scale back, so be in you laggards......

China will never say no.......

[iceman]

Don't think there is any chance of China saying no to a Chinese company buying up good foreign agriculture assets. I look forward to going on this ride with Agria.


They also need to receive the OK from china authority before the deal is unconditional.

[winner69]

And the Maoris have taken a cornerstone shareholding in the Agria New Hope partnership as well

[Balance]

And the Maoris have taken a cornerstone shareholding in the Agria New Hope partnership as well

Smart. Now they are using their treaty money and PC endowed power to do some good for themselves.

Watch out - the Chinese and the Maoris will end up owning NZ!

[flyingmariner]

Voltaire and Iceman, thanks for the help.

[bung5]

I'm guessing that if it gets scaled back quite a bit then people will dump the remaining shares on the market the following days will be a good chance to buy back in again for 20-30% cheaper than the shares just sold to agria

[bung5]

well yes that was my plan

[Xerof]

they'll now get near 100% and scale back

The rush is now on - over 73% today I see

I think the weight of scaling, including PGC who are committed and time pressured sellers, will tip the balance towards leaving more sellers than buyers in the short term.

if you want to buy, sit on a bid - they will come to you......

[mikew]

Acceptance could be over 80% for such low partial T/O, as a kiwi shareholder me feel very shame.

[winner69]

Seen heading into the registry today ... 100% for sure

3355

[winner69]

http://www.stuff.co.nz/business/farming/4912952/PGGW-may-become-two-businesses

Seems the split of PGW into various businesses is quite well understood by those in the know. What will happen to PGF tho? ;)

.... some might ask before or after the next government bailout! .... if what Xerof and Bill says has any credence

[winner69]

Belg was on to it on the PGC thread ....local PGW shareholders will agree to anything as long as there some short term gain for them

Chalkie in todays Dom Post also says so .... unless they some more spine they will be taken to the cleaners good and proper.

One thing Chalkie and i agree on is that PGW is well and truely f##@#d anyway .... so getting a bit extra than what they are worth today is probably a good result

I like Chalkies scenario that Agria will list a company on the Hong Kong exchange and then buy the Agritech (seeds) bit for a few hundred million which essentially leaves other PGW shareholders out in the cold with a pittance and no chance to benefit from the huge value this part of the business has (sorry percy you won't see this coming to you I'm afraid)

Chalkie says that the finance arm will probably go to somebody like BSH very soon .... thinks for about $100m .... but wouldn't it be interesting if what Xerof has heard is true .... confirmed to some extent by Bill English .... and their is a **** load of problems with the investment book .... and nobody wants to pay $100m for it

Chalkie surmises taht the leftovers will be hocked off (given away) and hey presto PGW no longer exists and the local shareholders realise that their huge support (how much have they pumped in lately) for PGW has come to nought and it all ends up in tears

I think Chalkies message was that you shareholders need to toss in the rubbish bin anything that comes from company and keep saying NO NO ..... but maybe a yes to getting rid of Finance before it is too late

[COLIN]

Many of you have probably not been around long enough to remember what happened to minority shareholders in the likes of Trans Tasman Properties and Brierley once gentlemen from East Asia took control. Guess whose interests came first!

[kizame]

Thank you Winner69 and Colin,very insightful.

[Balance]

Many of you have probably not been around long enough to remember what happened to minority shareholders in the likes of Trans Tasman Properties and Brierley once gentlemen from East Asia took control. Guess whose interests came first!

Not true.

Trans Tasman Properties was from Robt Jones Investments and just about broke before the Asians got involved. They pumped in good property assets in Asia and the company survived.

Brierley Investments was stuffed up by Paul Collins and his bunch of jet-setting freeloaders. The Asians bought in very expensive ($1.45 per share from memory) and when BIL nearly went under, took control.

Both companies were basket cases until the Asians took decisive action to protect their investments.

New Zealand shareholders were very lucky they had the Asians with their deep pockets and long term investment horizons - otherwise, they would have kissed their monies goodbye.

[macduffy]

I think Balance has got that right.

But as a general observation, shouldn't we expect those in control to place their own interests first? Otherwise, just don't sell out to them in the first place!

[Balance]

BTW, have a guess who are the biggest rip-off merchants in NZ

Clue - They are not from overseas! Not Asians, not Europeans, not Americans etc.

Answer - New Zealanders!

Finance companies run and promoted by high profilers, anyone?

Colin "Solid As" Meads.

Richard "Ability to withstand any financial conditions " Long.

[Winston]

Add to that crooked financial managers like Forsyth Barr and high profiler led South Canterbury Finance.

[Balance]

By Colin's definition of Asian interests, New Zealander interests = CROOKS.

Right?

[COLIN]

Not true.

Trans Tasman Properties was from Robt Jones Investments and just about broke before the Asians got involved. They pumped in good property assets in Asia and the company survived.

Brierley Investments was stuffed up by Paul Collins and his bunch of jet-setting freeloaders. The Asians bought in very expensive ($1.45 per share from memory) and when BIL nearly went under, took control.

Both companies were basket cases until the Asians took decisive action to protect their investments.

New Zealand shareholders were very lucky they had the Asians with their deep pockets and long term investment horizons - otherwise, they would have kissed their monies goodbye.

You may well have a point as regards the BIL fiasco, Balance, but I must supply a bit of further important detail which will give a different slant to your version of the outcome of the TTP saga, as I was directly affected. Those of us who elected to accept AGP shares in exchange for our TTP holding, ended up in a back alley in Hong Kong. There was a short window of opportunity to sell these shares to SEA at 40p - which was roughly equivalent to what the other minority TTP shareholders received under the compulsory acquisition scenario - but the window was only open for a week, in the January holiday period, when a lot of us were cavorting at the seaside and didn't get our mail until the offer period had well and truly expired. Since then the AGP shares have traded only spasmodically on the AIM, at much reduced levels (currently about 23p) and it appears that the only buyer is Mr Lu - the SEA mogul - who can dictate the price and who now controls over 97% of AGP. I have doggedly refused to cave in and surrender my shares to highway robbery. The latest NTA per share is 83p (previous year 71p), no dividends are ever paid or proposed, and no doubt the honourable Mr Lu will derive great pleasure in eventually passing on his steadily expanding property empire to his sons, daughters, or whatever kith and kin he has, who in turn will continue the tradition of thumbing their noses at the pitiful minority shareholders who sit begging at the palace gates.

I have no desire to get into a long argument about all this, as I have more profitable things to do with my time, but I wish you well if you have a minority holding in PGW. It is some years since I had any exposure to this group, and I search the charts for PGW, PGC and BSH to see whether there might be some glimmer of hope in the indicators, but all in vain.

[COLIN]

By Colin's definition of Asian interests, New Zealander interests = CROOKS.

Right?

???????????????????????

[COLIN]

I think Balance has got that right.

But as a general observation, shouldn't we expect those in control to place their own interests first? Otherwise, just don't sell out to them in the first place!

????????????????????

We're talking about oppression of remaining minority shareholders here, McD. If you sell, then you are obviously no longer a minority shareholder, so you have no interest.

NZ supposedly regards itself as a civilised country, and securities laws supposedly have provisions to provide some measure of protection to minority shareholders.

[The BOWMAN]

Does anyone know when we can find out the exact number of shares sold by accepting the offer?

[mikew]

Does anyone know when we can find out the exact number of shares sold by accepting the offer?

No late than 02/MAY.

[macduffy]

????????????????????

We're talking about oppression of remaining minority shareholders here, McD. If you sell, then you are obviously no longer a minority shareholder, so you have no interest.

NZ supposedly regards itself as a civilised country, and securities laws supposedly have provisions to provide some measure of protection to minority shareholders.

Yes, I agree with all that, Colin, and NZ's commercial history is littered with examples of minority shareholders being badly treated. The environment in this regard is slowly changing but the reality is that majority shareholders put their own interests first.

[winner69]

Sometimes things are beyond redemption ... like PGW which in it's current form well and truely f####d

Many have tried to do something worthwhile with PGW but failed .... realisation is that in its current form it is slowly dying and as in nature needs to morph into something new.

Sadly when this happens the perceived value of the old state is never realised

[corlemar]

Does anyone know what PGW it is actually worth per share...? AGRIA bought 50.01% for $0.60c so surely they wouldn't have bought into PGW if (1) they thought it was a complete dog (2) paid more than what it's actually worth ?

[Balance]

Does anyone know what PGW it is actually worth per share...? AGRIA bought 50.01% for $0.60c so surely they wouldn't have bought into PGW if (1) they thought it was a complete dog (2) paid more than what it's actually worth ?

Ask Graeme Hart. He bought Carter Holt and Goodman Fielder when everyone thought they were past their used by dates. Got the companies cheap and went on to make billions.

[winner69]

Ask Graeme Hart. He bought Carter Holt and Goodman Fielder when everyone thought they were past their used by dates. Got the companies cheap and went on to make billions.

They were past their use by dates ..... just like PGW dreams don't come true from management by committee - esp when that commitee is dysfunctional leadership

Hart made billions out of GFF and Carter Holt by doing it his way away from the glare of shareholders who thought they knew best etc .... knew what had to be done and got on and did it .... and morphed both into something that didn't bear any resemblence to what they were

Interesting that once Hart got rid of GFF it seems to have gone downhill .... even today The Ausralian that things are so shocking it's ripe for a takeover .... but I doubt it hart would be interested

[nwood]

Accepted with all my shares, scaled back to 48%

[winner69]

Accepted with all my shares, scaled back to 48%

Using the cash to buy even more .... or have you given up on PGW

[nwood]

Using the cash to buy even more .... or have you given up on PGW

PGW was/is only a small part of my portfolio. I plan to site on the side line and keep a close eye on that their next move is from here.

[root]

Accepted with all my shares, scaled back to 48%

When does the settlement hit the bank account, haven't seen mine yet.

[nwood]

When does the settlement hit the bank account, haven't seen mine yet.

Settlement transfers are recorded in ComputerShare as being processed today, so I expect we will see payments overnight.

[Grimy]

I didn't really want to sell, and was disappointed by management rolling over and saying sell, but saw a chance to lower my cost so doubled my holding in the last few weeks.
Means I've ended up with about the same number of shares as before, but now my holding has an average share price of 44 cents.
Will see what happens from here on in.

[bung5]

And now the remaining shares get dumped onto the market. Good buying ops

[Snoopy]

PGW was/is only a small part of my portfolio. I plan to sit on the side line and keep a close eye on that their next move is from here.

I am with you on this one nwood. 'Sold' all my shares to Agria and got about 48% of them back.

144,104,680 = Agria PGW shareholding before takeover offer. (a)
379,068,619 = Agria PGW shareholding after takeover offer (representing 50.01% of PGW) (b)

=> Number of shares finally accepted from shareholders selling into offer = (b)-(a)= 234,963,999 (c)

592,405,107 = No. of shares held by Agria before scaling back (d)

=> Number of shares provisionally accepted from shareholders selling into offer = (d)-(a)= 448,300,427 (e)

%ge of shares accepted = (c)/(e)= 52.41%

Have resisted any temptation to buy back in because on current operating performance 46c looks kind of expensive. There is a big overhang of shares too as a result of PGC only getting around half the shares they wanted to sell away. I haven't dared rework my average entry price yet, but I know it is rather more than 46c.

My main reason for holding PGW was the ongoing 'no risk' stream of management fees they were going to cream from their former investment NZS. I also liked the robust finance arm that PGW could leverage into a total rural services division package. The profits from both of these developments are now or soon to be lost from PGW, removing my reasons for holding in the first place.

As you can figure I am now a very unhappy shareholder, and a bit of a stunned mullet. Will probably wash around in the shareholding pond for six months before I decide where to go from here.

SNOOPY

[Voltaire]

I am with you on this one nwood. 'Sold' all my shares to Agria and got about 48% of them back.
[snip]
SNOOPY

Snoopy, I think you'll find you sold 48% of them and got 52% back.

[corlemar]

Anyone any thoughts on what PGW is worth NTA? Irrespective of how it has or hasn't performed, surely it's trading at a discount is it not ?

[Snoopy]

Snoopy, I think you'll find you sold 48% of them and got 52% back.

Got the notice today in the mail and you are dead right Voltaire! You (or anyone else ) wouldn't be good enough to point out where I got the maths wrong would you?

TIA

SNOOPY

[Voltaire]

Got the notice today in the mail and you are dead right Voltaire! You (or anyone else ) wouldn't be good enough to point out where I got the maths wrong would you?

TIA

SNOOPY

Snoopy, your calculation method looks fine so I can only assume some of the numbers you quote may not be? (I haven't checked them).

I made my calculation based on PGC's SSH notice:

They had 138,827,080 shares prior to the takeover and 72,171,074 after ...

Giving a percentage retained of 51.99

[Snoopy]

Snoopy, your calculation method looks fine so I can only assume some of the numbers you quote may not be? (I haven't checked them).

I made my calculation based on PGC's SSH notice:

They had 138,827,080 shares prior to the takeover and 72,171,074 after ...

Giving a percentage retained of 51.99

OK thanks for enlightening me Voltaire. I pulled my numbers from the news releases of significant shareholdings as quoted on 'Stocknessmonster'. Before the takeover the most recent announcement that I could find was that Agria had 19.0% of PGW shares. Perhaps during the takeover offer period they also bought an extra 1% of PGW shares on market to take their holding to 20%. That would be legal under NZ takeover rules I think, and a lot cheaper than paying 60c per share as per their offer.

If indeed an extra 7584456 shares were bought 'on market' that would reduce the number of PGW shares Agria needed to buy under their offer to reach 50.01%. That is the only explanation that comes to mind as to why we all sold Agria less shares than anticipated.

SNOOPY

[winner69]

Obviously buying another seeds business in Australia is not a big deal .... just a story in the paper and no announcement

Wouldn't want to get shareholders too excited would we .... in a day or those who sold some shares to Agria will be losers

[Snoopy]

Reworking my figures

151,689,536 = Agria PGW shareholding before takeover offer. (a) (representing 20%)
379,068,619 = Agria PGW shareholding after takeover offer (representing 50.01% of PGW) (b)

=> Number of shares finally accepted from shareholders selling into offer = (b)-(a)= 227,379,083 (c)

592,405,107 = No. of shares held by Agria before scaling back (d)

=> Number of shares provisionally accepted from shareholders selling into offer = (d)-(a)= 440,715,571 (e)

%ge of shares accepted = (c)/(e)= 51.6%

Yet for some reason we all got only 48% of our shares accepted! Have PGW shareholders been ripped off? Should I complain to the NZX?

SNOOPY

[Snoopy]

Obviously buying another seeds business in Australia is not a big deal .... just a story in the paper and no announcement

Wouldn't want to get shareholders too excited would we .... in a day or those who sold some shares to Agria will be losers

I actually find this kind of non-disclosure irksome. When PGW bought the South Australian seed business a few months ago no price was disclosed and only after some sleuthing on my par, it emerged the business has been bought from the receivers. Why the need for such secrecy? The receivers were washed of their responsibility at sale time so why not just disclose the price? And surely with a company as heavily indebted as PGW is, the long suffering shareholders should be informed at least the magnitude of extra debt being added to the pile? If this is indicative of Agria controlled management, they are not off to a very good start in my books.

SNOOPY

[Master98]

I think seeds business is why agria keen to pggw, they will certainly expand in this sector, in the meantime i guess thay are taking with PGC or BSH about selling PGGWF loan book.

[kiwi_on_OE]

Nufarm are into seeds too. I wonder if they may do something together?

[winner69]

Reworking my figures

151,689,536 = Agria PGW shareholding before takeover offer. (a) (representing 20%)
379,068,619 = Agria PGW shareholding after takeover offer (representing 50.01% of PGW) (b)

=> Number of shares finally accepted from shareholders selling into offer = (b)-(a)= 227,379,083 (c)

592,405,107 = No. of shares held by Agria before scaling back (d)

=> Number of shares provisionally accepted from shareholders selling into offer = (d)-(a)= 440,715,571 (e)

%ge of shares accepted = (c)/(e)= 51.6%

Yet for some reason we all got only 48% of our shares accepted! Have PGW shareholders been ripped off? Should I complain to the NZX?

SNOOPY

Surely they didn't stuff up such a simple equation .... your logic seems on the mark.

I've seen a transaction statement where the sums seems to have been in 2 stages - firstly they have bought 38.03% of the shares and then in a separate transaction bought another 9.7%

Maybe the small print said everybody would sell 38.03% into the offer and then only what else Agria needed was prorated/scaled back on the acceptances .... but intuitively the maths seems the same but maybe not. Why else show it has 2 transactions>

Interesting

[Snoopy]

Surely they didn't stuff up such a simple equation .... your logic seems on the mark.



I keep having the feeling that I must be wrong. After all if I am right then PGC, that great creator of banks and wealth funds, have also been ripped off. And they have potentially lost much more in actual dollar terms if the scaling was incorrect than I have. I guess some boffin in the PGC back room has gone over the figures. But if they haven't it doesn't give me much confidence in the brains behind the new BSH bank!

SNOOPY

[Snoopy]

I've seen a transaction statement where the sums seems to have been in 2 stages - firstly they have bought 38.03% of the shares and then in a separate transaction bought another 9.7%

Maybe the small print said everybody would sell 38.03% into the offer and then only what else Agria needed was prorated/scaled back on the acceptances .... but intuitively the maths seems the same but maybe not. Why else show it has 2 transactions?


Winner, could it be that Agria transaction to acquire the 9.7% of shares was from PGC, and the Agria transaction to acquire 38.3% of shares was from the pool of shares submitted by everyone else?

SNOOPY

[winner69]

I keep having the feeling that I must be wrong. After all if I am right then PGC, that great creator of banks and wealth funds, have also been ripped off. And they have potentially lost much more in actual dollar terms if the scaling was incorrect than I have. I guess some boffin in the PGC back room has gone over the figures. But if they haven't it doesn't give me much confidence in the brains behind the new BSH bank!

SNOOPY

It's clear as mud Snoopy ... and as set out in the offer documents ... and how they have done it is as Alan says all kosher

I found a copy of the first document sent out ... dated 24 Jan


If you can get your head clause 2.5 and 2.6 on page 10 of that document you can see what they have done.

It all comes down the "specified Percentage' - the 38.3% being the driver and then if that doesn't deliver the number of share they were after they take these from the 'Surplus Share' on a prorate basis.

Means that not everybody sold the same %age of shares they 'offered' - it would seem taht if you offered 38.3% of your shares Agria took the lot but if you offered 100% of your shares you got 48% odd (actually 38.3% plus more as calculated under Clause 2.6)

Things not always as simple and straight forward as they appaear .... puzzle solved?

[winner69]

If you want to become a boffin read this - a worked example

http://www.takeovers.govt.nz/publications/partial-offers/

Not from the legislation but a proposal as to how it should work

[Under Surveillance]

Now the new owners (controllers) have the feet under the table we should see some action. Anyone care to start predicting the first thing they'll do?
Whatever, they'll be working towards upping their chances of grabbing a greater percentage of PGW, on the cheap again, as soon it suits them after the 12 months freeze expires. Until then Agria will want to understate improvements to PGW profitability and prospects, emphasise high debt levels (no reinstatement of dividends), raise the bogey of possible capital raising, and otherwise seek to keep the average share price down, especially immediately before they spring their next offer at a "generous" premium.

Think Olam and NZS.

[Master98]

Now the new owners (controllers) have the feet under the table we should see some action. Anyone care to start predicting the first thing they'll do?

PGG Wrightson sells stake in NZ Merino to farmers

PGG Wrightson Limited has today announced the conditional sale of its 50% shareholding in The New Zealand Merino Company Limited (NZ Merino) to Merino Grower Investments Limited (MGIL), which will put 100% of the company in the hands of its grower shareholders.

The transaction is conditional on, among other things, MGIL shareholder approval. On the basis that MGIL shareholder approval and other conditions are confirmed it is expected settlement will take place on 30 June 2011.

PGG Wrightson Managing Director, George Gould, said the agreement supports the vision of merino growers to determine their own destiny through gaining outright control of NZ Merino.

The $7,625,000 purchase price for PGG Wrightson’s 50% shareholding in NZ Merino was based upon an independent valuation prepared by PricewaterhouseCoopers.

For further information, please contact:

George Gould
Managing Director
Tel: +64 0212202342


Next step will be sale of PGWF loan book.

[winner69]

Does the $95m debts not going to Heartland suggest a certain degree of toxicity in the book ... as some have suggested

Don't you just love 'special purpose vehicle' which 'would work to realise or refinance these facilities over the short to medium term.'

So PGW get $100m for the good stuff .... and maybe have a problem with $100m .... zero sum or have I just got all the bits of info a bit mixed up

[Snoopy]

Does the $95m debts not going to Heartland suggest a certain degree of toxicity in the book ... as some have suggested

Don't you just love 'special purpose vehicle' which 'would work to realise or refinance these facilities over the short to medium term.'

So PGW get $100m for the good stuff .... and maybe have a problem with $100m .... zero sum or have I just got all the bits of info a bit mixed up


If you take Jenny Ruth's June 14th Article on Sharechat at face value, the real position is that PGW forks out $2.5m in cash to be rid of its finance division! Basically PGW keeps the bad loans and provides a $30m guarantee on some of the not quite so dodgy loans after they are sold to Heartland.

Also PGW has agreed to buy $10m worth of Heartland shares by forking out cash! To me this seems a ridiculous deal. PGW continues to bleed cash as a result, when it need to do just the opposite! I will be voting against this restructuring. It X's all the boxes.

SNOOPY

[percy]

If you take Jenny Ruth's June 14th Article on Sharechat at face value, the real position is that PGW forks out $2.5m in cash to be rid of its finance division! Basically PGW keeps the bad loans and provides a $30m guarantee on some of the not quite so dodgy loans after they are sold to Heartland.

Also PGW has agreed to buy $10m worth of Heartland shares by forking out cash! To me this seems a ridiculous deal. PGW continues to bleed cash was a result when it need to do just the opposite! I will be voting against this restructuring. It X's all the boxes.

SNOOPY
Still looks to me as though PGW will end up with PGC's PGW shares.Whether they trade Heartland shares for PGC's PGW shares and then cancel them or not?.A bit of musical chairs, and be interesting to see who ends up with what when the music stops.

[winner69]

If you take Jenny Ruth's June 14th Article on Sharechat at face value, the real position is that PGW forks out $2.5m in cash to be rid of its finance division! Basically PGW keeps the bad loans and provides a $30m guarantee on some of the not quite so dodgy loans after they are sold to Heartland.

Also PGW has agreed to buy $10m worth of Heartland shares by forking out cash! To me this seems a ridiculous deal. PGW continues to bleed cash was a result when it need to do just the opposite! I will be voting against this restructuring. It X's all the boxes.

SNOOPY

Seems to defy all common commercial semse eh Snoopy

Makes you wonder just how bad bad is - you'd have to think really bad eh and soemthing that PGW will need to provide for one would think

Maybe voting NO and getting rid of your shares is the way to go

[Master98]

Sale of PGWF loan book is part of Agria's restructing plan, I will vote YES because I believe they can do something different.

[GR8DAY]

.....I think the farming/agriculture sector will be coming in for a re-rating (upwards) over the coming months AND years. PGG should be a strong beneficiary of this process. Regardless of the state of any economy we all have to eat........the masses have to be fed. PGG should be seen as a safe bet in my opinion.

[Master98]

I hold next to nothing in this now and I'd be concerned about whether it is going to be managed in PGW's interest or Agria's

What's different between PGW's interest and Agria's? Agria hold over 50% PGW.

[Snoopy]

I will be voting YES too because I think companies that are propped up by finance companies aren't managing their core businesses properly. I.e. letting them expand and contract with the economic cycles and/as-well-as being counter cyclical and picking off competitors in the troughs or otherwise expanding capacity and banking the big profits in the peaks and being ready to do the same next cycle.


Belg, what company in recent years bought up Reid Farmers (via PGG), Williams and Kettle and reverse took over Pyne Gould Guinness, creating one of the greatest expansions and rationalizations in NZ's rural servicing history? That company was Wrightson's wasn't it? And having a finance arm at the time didn't appear to hinder the process.

You may remember they also did bank big profits, which unfortunately were squandered over the Norgate years with their undercapitalised spending spree into both NZS and PPCS. Personally I don't blame Norgate for this as I understand that in business you take risks that don't always pay off. But IMO PGW will be considerably weakened without a finance division, just as they were significantly strengthened when they reinvented it a few years ago.

SNOOPY

[Snoopy]

.....I think the farming/agriculture sector will be coming in for a re-rating (upwards) over the coming months AND years. PGG should be a strong beneficiary of this process. Regardless of the state of any economy we all have to eat........the masses have to be fed. PGG should be seen as a safe bet in my opinion.

I would argue that the re-rating has already happened. On a P/E basis the share price of PGW is ridiculously high, about double that of RBD which given your food logic I would argue is a much better bet from here on forwards!

SNOOPY

[Snoopy]

Sale of PGWF loan book is part of Agria's restructing plan, I will vote YES because I believe they can do something different.


Agria as I understand it have a long term plan to extract the seed business out of PGW and flog everything else off. PGW was recapitalised inadequately and has been struggling under a mountain of debt, while Agria sell off PGW business units to pay the grocery bill. I am very unimpressed with Agria's management so far. The two directors directors seem to take very little interest in the NZ side of the business as evidenced by their appointments of alternates to take their place at most board meetings.

The two deals announced since the AGM, the addition of a seeds business in Queensland and now this are both cashflow negative from what I can make out. Senior executives Michael Thomas and Andrew McSweeny are leaving. If you can think of anything positive to say about the Agria controlled PGW I would be very interested to hear what it is!

SNOOPY

[Snoopy]

I will be voting YES too because I think companies that are propped up by finance companies aren't managing their core businesses properly.


But this deal will not remove PGW from the finance business Belg! PGW will take nearly $100m of toxic loans directly onto their books. And PGW will prop up $30m of not quite so dodgy loans in Heartland 'Who knows if it will ever become a bank' such that Heartland gets the upside if they turn out OK and PGW gets the downside if they go bad. Plus they end up with a 10% stake in Heartland as another distraction to management to take them away from their core business.

I will agree to disagree with you on the merits of owning a finance business. But if you want the finance business gone, why would you support a deal that does not achieve this? This is a smokes and mirrors sale of PGW Finance, not a real sale. And the nominal price PGW are going to get doesn't even seem very good

SNOOPY

[winner69]

and the market seems to like the deal with shareprice going up - as Belg keeps on saying the market just doesn't seem to get it

Wait until the $100m is 'written off' - but it will OK because it will be a non cash charge in the accounts

Wonder what a proforma balance sheet looks like with the stuff they are giving away taken out and an allowance made for the toxic stuff .... gut feel is it would look pretty sad

[Snoopy]

Wonder what a proforma balance sheet looks like with the stuff they are giving away taken out and an allowance made for the toxic stuff .... gut feel is it would look pretty sad

Perhaps the whole thing is a 'forced deal' designed to appease their bankers?

SNOOPY

[Snoopy]

Snoopy, W69, The accounts are certainly very opaque at present. I suspect even Liz would not be confident on many points. Me? I'm simply focussing on cashflow only. Everything else is changable on someone's whim be it Agria, Banks, the market, etc., etc.

I agree Belg that information is lacking. Rather than prejudge things I will wait for the experts report in the mail that has apparently declared the deal 'fair', and study it to try and understand why. Whether the deal is 'wise' though, may be quite another question.

PGW now has fallen under my 'wait and see policy'. I like to give management 6 months breather after they announce a policy I don't like, so I don't sell in haste in a spur of the moment decision.

SNOOPY

[kiwi_on_OE]

Biscuit - you've lost me a bit on your 50% and 100%. Agria own 50% of PGW, so should want it to perform. Are you saying they're stitching up some deals behind the scenes between Agria and PGW to the advantage of Agria? In theory that would require non-Agria shareholders in PGW to agree, of course we live in 'NZ financial markets reality' so who knows what might go on.

Snoopy/Belgarion - PGW will still be providing finance in-store, just not onto their own books, and hopefully getting a fee for doing it? From memory last year they did say they were going to get out of long term loans and focus on seasonal finance etc., so this is really just taking that process a bit further. Bit surprised that the sale is at NTA, with no premium. If it's not worth any more than that after excluding the dodgey stuff, then it might as well be sold. Presumably the Heartland stake will be flicked on within a year or so.

[Snoopy]

I will wait for the experts report in the mail that has apparently declared the deal 'fair', and study it to try and understand why.


Quite a bit of homework arrived for PGW shareholders to read over the weekend.

For those who couldn’t be bothered reading all the ‘Explanatory Memorandum’ of the proposed sale of PGG Wrightson Finance (PWF) by PGG Wrightson (PGW), I can summarize the proposed deal drawn up by PGW management in two sentences:

“We think PGW Finance is probably stuffed. Let’s hide it under the carpet now, to avoid possible future embarrassment.”

I have to commend Northington Partners (hereafter NthPs) on a comprehensive valuation report on PWF. However, my conclusions from the report and what PGW management wants me to conclude are somewhat different. Let’s examine my own assessment of the data in the report that lead to my above two-line version of PGW management’s summary. Specifically, I want to address some critical questions.

SNOOPY

[Snoopy]

Specifically, I want to address some critical questions.


Funding a finance company is a combination of taking term deposits from the public and ironing out any mismatch (both in timing and magnitude) between borrowing arrangements and on-lending arrangements via your finance company bankers.

Page 61 of the PGG Wrightson (Finance Division) Explanatory Memorandum (14th June 2011), (hereafter referred to as PWFEM) purportedly shows a dramatic fall off in PWF deposit reinvestment rates this year. The implication is that the public is liable to lend far less money to PWF in the future. However I read this graph rather differently.

The (most recently plotted) March 2011 reinvestment rate dropped to an all time low of 50% -that’s true. But just two months previously the reinvestment rate was a record high of 90%. The drop in reinvestment rate for the month of March 2011 looks to be a repeating seasonal factor over the last two years. I think it is incorrect to interpret an historically repetitive two month decline as an imminent portent of permanent finance gloom. An alternative explanation could be reduced promotion (p63 ‘Outlook’ states the three-year business plan has been suspended as a result of the possible change of ownership of PWF). A counter argument might be that the demise of so many finance companies in New Zealand could see more investor interest in those few with their good names still intact, like PWF.

A legitimate concern for PWF is the imminent expiry of the Crown retail debenture guarantee. That could effect depositor’s reinvestment decisions. PGW has a credit rating of BB (stable) which is not an investment grade rating. The proposed new owner, Heartland Building Society (HBS), has a credit rating of BBB- (stable). That is investment grade, albeit only a step above the credit rating that PGWF now has. However there is no guarantee that HBS will retain this BBB- rating if it acquires the PGWF loans. In fact it is implicit that HBS will not, as the proposed transaction will be accompanied by a capital raising by HBS.

Of further concern is the demise of the ‘risk sharing agreement’ with ASB Bank (p42), should this deal go through. Since ASB has a higher credit rating than either PGWF or HBS, IMO taking ASB out of the banking facilities loop is a negative for the whole transaction. Another negative will be the demise of PGWFs separate $100m presently unused overdraft facility. My conclusion then is that despite a projected (and I stress that word) one step higher overall credit rating applying to the loans if the deal goes through, HBS will in effect be ‘on its own’ afterwards. Without any equivalent replacement of the ASB risk sharing facility and the removal of the cushion of PWFs currently unused but existing overdraft provision, I can’t see how the overall security rating of the transferred loans is improved by this deal.

No matter what the result of the vote, it is a given that $95m of selected loans will be transferred to a Special Purpose Vehicle that will be retained by PGW. These loans are apparently so toxic that HBS doesn’t want a bar of them at any price. I presume these loans will be written off in the current financial year by PGW. Doing it this way means that if, in the future, PGW is able to recover any value from these loans they will be able to claim these recoveries as ‘extraordinary profits’ and look good. The reality unfortunately for PGW shareholders is that these write-downs were actual shareholders cash once.

The whole deal is being sold as PGW ‘getting out of finance’. But part of the deal is predicated on PGW supplying $10m towards a Heartland Building Society (HBS) recapitalisation. This more than cancels out the net $7.5m that HBS will pay to PGW for taking control of their ‘good’ loans. This much-touted sale of PGG Wrightson Finance is in reality yet another cash drain for PGW – the exact opposite of what is needed!

So, to answer my question: Is PGG Wrightson Finance Stuffed? I don’t think it is possible to answer that question definitively. But one thing that is obvious is that PGW has no spare cash to support their finance division should it get into further trouble. And it is doubtful that 50.01% shareholder Agria can inject any more funds into the company either. Given this, you can see the appeal to PGW management in sweeping everything under the carpet. I can’t see how ‘focussing resources on core business activities’ (which sounds admirable) translates to the reality of:
1/ Hiding $95m of debt while you concentrate your resources on other branches of the business that can contribute $25m profit the next year at best, while all the time:
2/ Your cashflow drains away by another $2.5m.

I don’t like this proposed 'sell the finance arm scheme' in concept, because having studied the detail I don’t think it does remove the financial arm from PGW management’s worry list as claimed. Nevertheless I do accept this conclusion is a matter of opinion. I would be interested to hear from those that feel differently and why.

SNOOPY

[Snoopy]

There is a despondent picture painted around the price at which ‘finance debt’ has been exchanged from one financial institution to another since October 2008 (page 79). Since the global financial crisis there is real doubt over whether non-bank deposit takers in New Zealand have a future at all. NTA is now the benchmark for price setting. Buying a debt at NTA is a suitable measuring stick, because it provides an estimate of the money that can be recovered assuming the underlying business cannot continue as a going concern. Selling debt at NTA is effectively an admission that that the brand value of PWF is almost nothing. This is a sad admission by PGW management.

NthPs conclude that selling debt at NTA in the current environment is reasonable, and because these are the terms agreed between PGW and HBS the deal is fair. However the deal terms at NTA do not tell the full story. Adjusted NTA at $102.5m will be accepted only on the understanding that up to $30m of that debt will be refunded by PGW if collection proves not possible. And secondly an additional $95m of toxic PWF debt remains with PGW, because the buyer (HBS) does not want to take it on at any price.

This means the real recovery rate on the purchase of all PWF debt, from the point of view of PGW is down to:

($102.5m - $30m)/($102.5m+$95m)= 36.7%

Some may argue that this ‘worst case’ scenario overstates how bad this deal is for PGW. I would argue that HBS sees no possibility of recovering any of the toxic $95m loans, hence the reason they are not prepared to acquire it at any price. I would argue further that once the deal is done there will be little incentive for HBS to collect the doubtful $30m. That’s because if HBS do nothing and the debt goes bad they already have an agreement to be reimbursed by PGW!

Even with a more optimistic debt collection scenario it is hard to see the total recovery by PGW from all loans PWF currently has to be above 60%. Even in this scenario, if HBS purchases the debt under the terms of the proposed agreement then they are purchasing the debt discounted by around 40%. That is nowhere near the ‘sell the debt for NTA scenario’ that PGW management are spinning shareholders. In summary IMO the price of this deal makes it a very good deal for HBS and a very bad deal (way below comparable transaction rates) for PGW shareholders.

SNOOPY

[Snoopy]

What if the deal fails?

Buried in the small print of the PWFEM on page 41 is what happens if the deal falls through. HBS will purchase PWF loans with a face value of $50m. Perhaps I am just not getting it. But this seems a far better option for PGW shareholders. I believe this fall back deal is superior because:

1/ The loan portfolio is derisked by getting rid of $50m of loans to HBS, aligning the loan portfolio better with a projected reduced inflow of depositor funds.
2/ The ASB bank risk-sharing arrangement with PWF is maintained.
3/ PGW gets a cash injection of up to $50m, instead of a $2.5m cash drain under the proposed headline deal

IMO this ‘fall back option’ is clearly a vastly superior option to the proposed headline deal. Firstly cash is coming in rather than going out and secondly the banking arrangements look superior. IMO there is no contest between the two options. But if this alternative deal is to happen, shareholders have to vote ‘no’ to the proposed outlined buyout of PWF finance. Tragically this alternative deal is only mentioned once in the whole PWFEM, so many PGW shareholders may not even be aware it exists!

SNOOPY

PS In case I haven't been clear, I will be voting 'no' as the way to go.

[Snoopy]

http://www.directbroking.co.nz/directtrade/dynamic/announcement.aspx?id=2822355

So the new PWF, now owned by Heartland will get a credit upgrade if the deal goes ahead. That is good news, but isn't that a recognition of the extra capital raising that Heartland has as part of this loan acquisition plan?

If I am wrong and the credit upgrade is due to the underlying quality of PWF assets by Standard and Poors, then all the deal will achieve is a reduction in quality of the underlying banking facilities supporting these loans. That makes no sense which makes me think that more than ever this is bum deal for PGW shareholders.

SNOOPY

[Snoopy]

I wouldn't read that into it at all. HNZ has a business profile that they're trying to maintain as they move forward. Some of the PGF loans wouldn't have fit that profile at all due to varying factors. To imply it is toxic on this basis, i.e. that a newly formed entity looking for a banking license and wanting to keep its loan book whiter than white didn't want it, simply isn't a reasonable conclusion.

Possibly Belg. According to the PWFEM the acquisition of the proposed loans will nicely balance out the HBS loan book, so perhaps you are right and they just don't want excessive rural loans that will excessively weight the loan book towards the rural hinterland. If that is so I would be in favour of selling $50m of loans to HBS (the alternative deal) and have HBS come back for more at a later date. That should strengthen PGW's bargaining hand.

SNOOPY

[Snoopy]

As a holder of both PGW and HNZ ... I will be voting Yes. ... Snoopy, I'm guessing you don't have any HNZ which is while you feel so strongly about it?


Right, I have no HNZ. I was going to ask you whether you think the deal is skewed towards PGW or HNZ Belg, but I guess because you are on both sides of the fence it doesn't matter to you?

Are you even allowed to vote Belg, being an associated party? I would have thought you would be in the same position as PGC?

SNOOPY

[winner69]

Great work Snoopy - you deserve a medal and more fpr ploughing through all that stuff ... when i saw a copy I gave up when I saw the diagrams explaining the tranasctionss.

My theory is that if a picture can't expalin what's going on then it is so complicated that even the architects of the arrangment probably don't know either

I totally agree with you - “We think PGW Finance is probably stuffed. Let’s hide it under the carpet now, to avoid possible future embarrassment

Well amost agree ... I have said for a while toally f####d or something like that ... the whole PGW that is

If indeed even if only some of the $95m is toxic (note they do use the word impaired) one would have to question how honest PGW have been in their accounts of late .... no mention of any serious problems around the toxicity of their book eh ... and some on this forum have been indicating not all is as good as it looks

As usual Belg sees the good side and probaly thinks this is good deal for PGW but it ain't ,,,, only good as you say they might just get away with hiding an embarassment under the magic carpet.

But then agin we both are stupid and have mo idea .... like the market seems to think it is good if the shareprice anything to go by

[winner69]

Belg said - I'm guessing that NTA just happens to reflect the net realisable value. I.e. This is like a company selling off it's receivables to a debt collection agency (dca).

I guess differently - as PGW not disclosed any significant writedowns I guess NTA is still the book value of the debt in their books .... and probably include a fair bit of capitalised interest as well

[winner69]

Finance accounts filed last November showed 'impaired' loans of about $55m of which $12m had been provided for in the accounts (ie charged to the P&L and reducing the book value of the loans)

[Snoopy]

I don't think its a great deal for PGW - just that the other options, given how long they've been trying to flog PGF, weren't any better


The NZ shareholders association have come out against the plan to sell off PGW Finance

http://www.sharechat.co.nz/article/78602234/nzsa-criticises-pgw-finance-sale.html

"The company has claimed that a sale at asset value only is the best that could be arranged."

Hawkins said "that seems extraordinarily pessimistic when PGW are transferring a loan book of $491million with all the doubtful liabilities removed or guaranteed by PGW."

However, Agria are not a related party. So if they vote their shareholding in favour of this deal, does this in effect become a fait accompli?

SNOOPY

[Snoopy]

But then again we both are stupid and have no idea .... like the market seems to think it is good if the shareprice anything to go by


As a market follower Winner, I guess you will be pleased that the market has 'seen sense' and the share price of PGW has subsequently declined.



If indeed even if only some of the $95m is toxic (note they do use the word impaired) one would have to question how honest PGW have been in their accounts of late .... no mention of any serious problems around the toxicity of their book eh ... and some on this forum have been indicating not all is as good as it looks.

Finance accounts filed last November showed 'impaired' loans of about $55m of which $12m had been provided for in the accounts (ie charged to the P&L and reducing the book value of the loans)


Ok so with $12m of bad loans provided for, we are looking at a further finance loan write down of $95m-$12m= $83m. This will be in addition to the operation losses that PGW incurred in the first half of the financial year. Even at 49c, PGW is suddenly looking very very expensive.

SNOOPY

[Snoopy]

From the EM

"These loans amount in total to approximately $30 million. Under the Deed of Guarantee, in addition to
the Company guaranteeing the loans, HBS can require PGW to purchase any guaranteed loan that has
become impaired (due to, for example, non-payment by a borrower leading to default), at the full face
value of the loan, plus interest. PGW also has the right to require HBS to sell any impaired loan subject to
the Deed of Guarantee to PGW, again at the full face value of the loan, plus interest."

That's a tough clause! PGW (and Agria) will be very certain this won't be happening and I'm guessing it was an "insurance" clause entered to appease S&P and other rating agencies and HNZ depositors. The valuation report notes that PGW have this risk anyway ... The last sentence is interesting. What exactly does it mean now? And for the future? (I have a few ideas but others would be interesting).

The way I read things, the first sentence is talking about the guarantee that HBS have against PGW in case $30m of the loans they buy go bad. The second I find hard to interpret. Does it mean that if the loan ends up being impaired then PGW has the right to get any interest on the loan paid to HBS up to that point back? I can't see why PGW would want to take back an impaired loan back in house otherwise?

SNOOPY

[corlemar]

The NZ shareholders association have come out against the plan to sell off PGW Finance

http://www.sharechat.co.nz/article/78602234/nzsa-criticises-pgw-finance-sale.html

"The company has claimed that a sale at asset value only is the best that could be arranged."

Hawkins said "that seems extraordinarily pessimistic when PGW are transferring a loan book of $491million with all the doubtful liabilities removed or guaranteed by PGW."

However, Agria are not a related party. So if they vote their shareholding in favour of this deal, does this in effect become a fait accompli?

SNOOPY

To be honest, all along it appears a case of you scratch my back and i'll scratch yours, when it comes to the deals of PGW, PGC and HNZ. So it shouldn't really surprise us with an article like we've just read.....problem is, does anyone really know if there is any validity in it I.E. If this is the best deal, then i don't see the real value for PGW shareholders....as the article states, PGW appear to be tackling the greater risk and it seems a win win for PGC and HNZ.....I don't know maybe we're missing something and once the dust has settled PGW will actually function and perform as a company where it has lacked in recent years !!

[Snoopy]

If this is the best deal, then i don't see the real value for PGW shareholders....as the article states, PGW appear to be tackling the greater risk and it seems a win win for PGC and HNZ.....I don't know maybe we're missing something and once the dust has settled PGW will actually function and perform as a company where it has lacked in recent years !!


I think with any management change at the top, there is usually a willingness by shareholders to 'give the new broom a go'. IOW PGW management are currently in the honeymoon period. I can understand this, but I don't think management can be automatically trusted on such a significant change of direction as this. Some shareholders no doubt have adopted an ideological position that in house finance is an integral part of rural servicing (in which case they will be voting against this deal) and those that think that finance is a distraction to management's core business (in which case they will be voting for it).

One week ago I was in the first camp. However, on further perusal of my divisional PGW spreadsheet, I noticed that apart from FY2009, in all other years subsequent to FY2006 the performance of the finance division has been dismal. So I have moved more into the undecided camp, which makes it easier for me to look at this proposed sale of the finance division as a disinterested party.

If you accept that management have come to a decision to quit finance, then you have to ask how will this deal work towards that outcome? If management are genuine on this course what will their involvement in finance be if the deal goes through? Well PGW will have around $100m of dubious loans on the books and a 10% share in the soon to be Heartland bank. However way you look at it, PGW will not be out of finance as a result. $92m is not a trivial amount of money as it is equal to about four years normalized PGW profits. Such an amount IMO should receive the upmost attention of management, and not be put aside which management pursues 'other objectives'. In my assessment the sale of PGW Finance will not achieve the result that management wants.

From a strict economic argument, separating off some bad assets so you can sell the remainder at some kind of face value is selling at a discount by another name.
Comparative transactions have shown that most finance company debt has been transferred at asset backing, not with a discount. The overall result of this deal is a sale of debt at below market rates.

So leaving side all philosophical arguments on the direction of the company, I would argue that this is a bad business proposal at a lousy price. The deal should be rejected on that basis, not because on any ideological prejudice.

SNOOPY

[winner69]

But Snoopy PGW (the Company) is getting about $100m for Finance ... HBS are going to pay that much ..... so they are selling Finance and getting about NTA The paperwork says HBS then owns these loans. End of transaction


But at 12.04 or something the Company then lends this new company to buy the crappy ones back eh ... and gives HBS some money for them .... and this new company has some real assets .... nice one .... whoops I frgot it also owes the Company a fair bit as well

Its all this tricky stuff that seems rather suspicious eh ... I still wonder how crappy the crappy stuff is really worth

[percy]

Would the bad loans be with Crafar farms,and Dairy holdings?
I would not be surprised to see PGW's holding in HNZ exchanged for PGC's PGW holding,which PGW would then cancel , [those shares].

[Snoopy]

Would the bad loans be with Crafar farms,and Dairy holdings?


The Special General Meeting of 28th June was well attended and light was shed on the strategic reorganizations that will shape PGWs future.

Both the chairman and CEO of Ngai Tahu Investments were in attendance. Chairman Trevor Burt gave a short address emphasizing the common culture between the Chinese and Maori way of looking at things: an intergenerational time horizon, with an emphasis on relationships. He outlined the tribe’s increasing presence in the food industry. Dairy farms are being developed in Canterbury on former forestry blocks. Ngai Tahu has fishing interests. He saw the PGW stake as a progression and diversification of the food arm of their business investment strategy.

A shareholder asked: “Why not just buy a stake in PGW directly, rather than buy into the holding vehicle of Agria Asia?” “After all PGC has a stash of PGW shares that it wants to sell.” Burt replied that buying into Agria Asia better cemented Ngai Tahu’s relationship with the Chinese.

The subject of the unloading the finance division brought a tirade of questioning from the Shareholders Association, and others. PGW Chairman Sir John Anderson gave a speech outlining the demise of 90% of this country’s finance companies and the time and money costs of the new regulatory requirements for remaining lenders. In response to questioning, Sir John admitted there was no specific plan to make up the lost cashflow from this soon to be sold arm.

Sir John continued that with the expiry of the government guarantee in a few months time, there would be $200m in PGG Wrightson Finance (PGF) depositors’ funds up for reinvestment. By implication he didn’t consider much of this would be reinvested with PGF. This means an associated downsizing of the loan portfolio is required.

A shareholder recounted the previous sale of the last incarnation of PGF to Rabobank. They questioned whether the board was making the same mistake again. The chairman was quite candid that Rabobank had not been a good preferred finance partner. Rabobank refused finance deals that would have gone ahead under in house finance management. He said that Heartland (HBS) (soon to be bank) was a different prospect. The finance people dealing with customers were going to be the same people (rehired from PGF) and the culture was a better fit. The upcoming $10m investment in HBS by PGW was not a short-term funding package for Heartland to be flicked off on the next share price upturn. It was a tangible expression of a long-term strategic partnership and not for sale. I wanted to believe Sir John on this, but I am not sure that I did!

Most of the dissent on the PGF sale related to the sale price. Pre Global Financial Crisis (GFC), selling a finance company on 10 times earnings was an industry rule of thumb. Post GFC the rules have changed. Selling finance assets at net underlying company asset backing was considered a good deal. So renegotiating the deal to reflect some goodwill of the PGF name, as the Shareholder’s Association wanted, wasn’t going to happen. He said that if a deal was not done then receivership for PGW Finance was an option, albeit an unpalatable one. It was shocking to see. But the board had clearly given up all hope for PGF. This after all those press releases of two years ago in response to NZX questioning trumpeting their term deposit reinvestment rate. And by implication how sound the outlook of the PGF was!

A shareholder questioned Sir John on the associated proposal for PGW to retain finance debt of nearly $100m. The chairman explained that this money had not been, and will not be written down. PGW believed it was 100% collectable. The reason these financial assets had not been sold was due to the financial structure of the buyer, Heartland. HBS is in the process of raising capital. The PGW retained debt contains a capitalized interest component, and that changes the tier of debt classification. In turn that means any financial entity with that debt on their books must hold more shareholder funds capital to support that lower tier rated debt. This is why Heartland was not taking on this PGW retained debt. To do so would require HBS to raise more capital compared to the other option of just taking debt with regular cashflow of equivalent value. After the meeting I had a conversation with an executive who said that once the banking licence was obtained and the capital raising complete, Heartland could be interested in looking at taking on this PGW retained finance debt. Perhaps, but I will believe it when I see it. Nevertheless I was placated to find out that there is more hope for what I have previously termed this $100m of ‘toxic’ retained debt than I thought.

Heartland has still to raise the balance of capital needed to complete this family of transactions. Long suffering PGC/Heartland shareholders may find another call on shareholder funds coming if the subsequent institutional placement of new HBS equity strikes a snag.

The meeting concluded with morning tea: bumper trays of freshly baked giant cookies and coffee/tea. Horses training on the Riccarton racecourse track made for a pleasant outlook from the warmth of the stands.

SNOOPY

[Under Surveillance]

[QUOTE=Snoopy;349958]The Special General Meeting of 28th June was well attended .........
Thanks for taking the trouble to inform allcomers, Snoopy

[Voltaire]

Thanks for taking the trouble to inform allcomers, Snoopy

I'll second that - good to get an informed account of proceedings Snoopy, many thanks.

[percy]

Yes thank you SNOOPY.Owners see things better than reporters.

[Snoopy]

Yes thank you SNOOPY.Owners see things better than reporters.

Particularly when there weren't any reporters there!

SNOOPY

[Snoopy]

It's clear as mud Snoopy ... and as set out in the offer documents ... and how they have done it is as Alan says all kosher

I found a copy of the first document sent out ... dated 24 Jan


If you can get your head clause 2.5 and 2.6 on page 10 of that document you can see what they have done.

It all comes down the "specified Percentage' - the 38.3% being the driver and then if that doesn't deliver the number of share they were after they take these from the 'Surplus Share' on a prorate basis.

Means that not everybody sold the same %age of shares they 'offered' - it would seem taht if you offered 38.3% of your shares Agria took the lot but if you offered 100% of your shares you got 48% odd (actually 38.3% plus more as calculated under Clause 2.6)

Things not always as simple and straight forward as they appaear .... puzzle solved?

I’m a bit late responding to this message but some things just keep niggling away at the back of your mind. I don’t like being ripped off by corporates, so I guess that’s what has kept it festering. Firstly I had to get over the shock of not all shareholders being treated equally. It has taken me some time before I was able to move on from that.

Now your explanation Winner. Superficially it reads well. But I got to thinking. There were shareholders that chose to not offer all of their PGW shares into the Agria offer (and in the extreme elected to keep all of their shares to themselves). By keeping some shares, that means that the other shareholders would have had proportionately more of their own shares accepted as the offer was scaled, not less. Your explanation, I think would imply that I should have been surprised ‘the other way’, by having more of my shares accepted than I anticipated. So I don’t think this puzzle is solved yet.

SNOOPY

[Snoopy]

If you want to become a boffin read this - a worked example

http://www.takeovers.govt.nz/publications/partial-offers/

Not from the legislation but a proposal as to how it should work

Great reference Winner, and one that supports my thinking in my previous post:

“24/ The effect of the pro rata scaling provisions is that offerees who send in "excess" acceptances will have a greater proportion of their securities taken up by the offeror than offerees who only accept the offer in respect of the specified percentage of their securities or less. The scaling provisions would not be triggered if every single offeree accepts the offer and all of them accept in respect of exactly the specified percentage of their securities sought by the offeror.”

It was also revealing to read that many of the partial takeover offers that had been presented for compliance with the takeover law had run into illegality issues.

A hypothetical example of shares held in the name of a custodian was noteworthy for unequal treatment. Could that have occurred in the PGW case? Looking back on the twenty largest shareholders as listed in PGW AR2010, we see the following shareholdings are consolidated in the New Zealand Central Securities Depository Limited (NZCSD):

ACC 3.99%,
AMP Investments Strategic Equity Growth Fund 3.68%,
National Nominees New Zealand Limited 2.95%,
Citibank Nominees (New Zealand) Limited 2.75%,
HSBC Nominees (New Zealand) Limited (a/c 90) 2.55%
NZ Guardian Trust Investment Nominees Limited 1.96%
HSBC Nominees (New Zealand) Limited (a/c 45) 1.80%
NZGT Nominees Limited – AIF Equity Fund 1.60%
Asteron Life Limited 1.28%
Tea Custodians Limited 1.12%

Those are small numbers individually but add up to a not insignificant 23.68% of PGW shares. Apparently the partial takeover laws do not allow the offeror (Agria) to look through a registry holding to see who the individual shareholders are. So the company that made the takeover offer might hypothetically be offered all of ACCs, AMPs, National Nominess and NZGT shares adding up to 12.2% of total PGW shares, while all the other large custodial holders kept their shares.

Agria sees 12.2% of the 23.68% of NZCSD held shares offered to them without knowledge of exactly who has offered up their shares. Now 12.2%/23.68%= 51.6%, the same as the 51.6% of shares that Agria ultimately want. So Agria accept all of the NZCSD shares offered to them, and that means ACCs, AMP, National Nominess and NZGT are paid out in full. This is quite a different outcome for these companies than if they had held shares in their company name directly. In that instance they would have been paid out on only 51.6% of their shares, which is all the small shareholders should have got. Naturally if some shareholders get more than 51.6% of their shares accepted, that means that other shareholders will have to get less than 51.6% of their shares accepted to allow an overall average of 51.6% of shares to be accepted.

SNOOPY

[Snoopy]

Reworking my figures

151,689,536 = Agria PGW shareholding before takeover offer. (a) (representing 20%)
379,068,619 = Agria PGW shareholding after takeover offer (representing 50.01% of PGW) (b)

=> Number of shares finally accepted from shareholders selling into offer = (b)-(a)= 227,379,083 (c)

592,405,107 = No. of shares held by Agria before scaling back (d)

=> Number of shares provisionally accepted from shareholders selling into offer = (d)-(a)= 440,715,571 (e)

%ge of shares accepted = (c)/(e)= 51.6%

Yet for some reason we all got only 48% of our shares accepted! Have PGW shareholders been ripped off? Should I complain to the NZX?


Anyone following the argument will realize that this will not explain why I got less than my expected 51.6% of my remaining shares accepted. If I also had my shares with NZCSD and only applied for part of my shares to be accepted into the offer then my argument works. But since neither of those conditions are met, I still don’t know why…..!!! Still feeling ripped off.

SNOOPY

[Rusty]

Hey guys. New to Share Trader forum. Been following PGW, how low can they go. Surely it is a good buy at these prices. I think there are people sitting on the sideline waiting for buy signals, to reinvest their money from agrai. Surely the share price will recover. Any thoughts.

[macduffy]

Hey guys. New to Share Trader forum. Been following PGW, how low can they go. Surely it is a good buy at these prices. I think there are people sitting on the sideline waiting for buy signals, to reinvest their money from agrai. Surely the share price will recover. Any thoughts.

Hi Rusty. Welcome to the forum!

No reason for the current downtrend to stop at this point so my approach would be to wait for an uptrend. Relative strength indicator is also horribly weak and would need to similarly improve to get my interest.

Cheers

[Rusty]

Good advice. Im watching closely for the turn. Thanks