PGW - PGG Wrightson

[Snow Leopard]

So the $64 question is:
When you get your share of the $235M, do you spend the whole $64 buying more PGWRR shares and at up to what price?

PGWRR used without permission from Snoopy Research & Speculation Unlimited.

[percy]

So the $64 question is:
When you get your share of the $235M, do you spend the whole $64 buying more PGWRR shares and at up to what price?

PGWRR used without permission from Snoopy Research & Speculation Unlimited.

I have been trying to work out whether it is better to buy now or not.?????.{Have a modest holding].
For: You know you will get a well directored/managed smaller business,with low debt and acquistion opportunities.
Against:, The smaller business is a "good" business,but not a "great" business,plenty of opposition and low margins.and limited growth.
Being a rural business there are a great number of variables which mean fluctuating earnings.

[RTM]

Your "againsts" are what is keeping me out Percy. Especially the "plenty of opposition".
In their store up here, they have little to distinguish themselves from other similar suppliers.
In the even of a major downturn, there could be some consolidation in the industry. They might be a casualty.
Hence I am out.

[Snoopy]

Agria & Alan Lai bought PGW for the seeds business, and they have been proven right that the seeds business is the one with real international growth potential.

https://www.nzherald.co.nz/business/...ectid=12177017

Excerpt : "Buried deep in a Grant Samuel report at the time was the pivotal sentence: "It is likely that PGW's substantial seed business is the primary attraction to Agria."

With the seeds business gone, PGWRR has no further purpose for Agria & Alan Lai.

Agria and Alan Lai first came onto the PGW scene ten years ago. I am aware of that history you document above Balance. The question you need to ask yourself is, do you think Alan Lai would have modified his views and intentions ten years on, after ten years in the PGW business?

I think Alan has realised that integrating PGW seeds into his own seed and crop business in China was fanciful. He quite rightly went along with ex-CEO Mark Dewdney's in house 'PGW Seeds' further expansion into the seed business Australia and South America, particularly Uruguay. Lai has given his investment 'ten years'. Profitability in Australia and South America has not improved. How long can you keep flogging a horse before the bankers who feed it require a 'resultant by product' other than horse poo? Don't you at some time have to pay back those bank loans? And if 'plan A' to pay back those loans isn't working, wouldn't it seem prudent to move to a horseless 'plan B', rather than buy yet another horse whip?

I have been a PGW shareholder all that time, and frankly there have been too many excuses in the management of 'Seed & Grain' since Alan Lai arrived on the PGW share register. IMV there hasn't been the right partnerships with the locals. I don't know why 'Agrocentro' in Uruguay has gone so wrong. I don't know why PGW seems to have, eight years out of ten, been operating in 'abnormal weather conditions'. I do know that 'PGW Seed and Grain' are operating way below their potential. I also know that 'PGWRR', before this year, have had some very good years. Is it so fanciful to suggest that Lai was introduced to the PGW family by catching the eye of the 'PGW Seed Sister' only to find that once inside the family it was the 'PGW Rural Rump Sister' that won his heart?

Also, he is persona non grata as far as the markets are concerned and will be much better off to do deals away from the public eye.

Hence, why he will sell Agria's stake in PGWRR.

Alan Lai hasn't done anything wrong in New Zealand though. With the retirement of Alan Lai himself from the PGW board, what will stop PGW operating with Agria as a silent shareholder? Do you think Agria shareholders will be pleased if Agria sell their only real asset?

SNOOPY

[Snoopy]

So the $64 question is:
When you get your share of the $235M, do you spend the whole $64 buying more PGWRR shares and at up to what price?

The answer to the ' Snow Leopard's ' question will depend on your investment motivation, and how long you can wait.

1/ If you view PGG Wrightson as a short term play to be taken out by their 'ELDers and betters' then yes, you probably want to buy back in. But not at a price more than ten times EBITDA and depending on how much profit you want to make, probably a lot less than that. The risk here is that the Agria stake in PGW will not be sold, or will be sold at near present market value to a basket of institutions at a discounted price. In that instance a full takeover may never eventuate. Having surrendered control of 'Williams and Kettle' to PGW many years ago, the Cushings may not want control to drift even further away. I think the Cushings have enough resource available to block any foreign takeover.

2/ If you are buying for dividend yield, then you want to buy back in at a price that gives a gross yield no lower than 8.5% based on business cycle returns (to account for the volatility of future earnings and patchy dividend record). In the Lai era past, all earnings have been paid out as dividends. But it is unclear that this will continue under the new PGWRR capital structure. Losing control of PGW Seeds could see competitors offered sweeter deals for the same product. Losing all of your intellectual property going forwards and being a dominant player in your chosen market already must limit growth prospects. Some guessing must be needed on what the dividend payout will be. And therein lies the risk.

Having said all of this, if you take a very long term view, it is hard to see a substantial amount of capital being lost, buying in at today's prices. So: "Do you have the stomach to ride the ups and downs of the rural services market?" is probably the more important question.

That's how I see things anyway.

In a logical market, I would suggest waiting until the details of the deal and future dividend policy are released. But given the 'Restaurant Brands' experience, it might be worth 'borrowing the money' from the announced capital repayment short term and buying in now, so that you can position yourself for the future before you get your capital repayment!

PGWRR used without permission from Snoopy Research & Speculation Unlimited.

I hereby grant the Snow Leopard unequivocal, including farcical, operating rights to use the term PGWRR ( meaning PGG Wrightson Rural Rump) in any future posts. Specific future acknowledgment of this will no longer be required.

SNOOPY

[Balance]

Alan Lai hasn't done anything wrong in New Zealand though. With the retirement of Alan Lai himself from the PGW board, what will stop PGW operating with Agria as a silent shareholder? Do you think Agria shareholders will be pleased if Agria sell their only real asset?

SNOOPY

https://www.sec.gov/news/press-release/2018-276

This is so serious that I believe Agria & he were only fined US$3m.

His reputation (& Agria's) is gone as a 'fit' & 'proper' person I would have thought - be fascinating to read the full terms ad conditions of the deal made with OIO.

[Snoopy]

https://www.sec.gov/news/press-release/2018-276

This is so serious that I believe Agria & he were only fined US$3m.

His reputation (& Agria's) is gone as a 'fit' & 'proper' person I would have thought - be fascinating to read the full terms ad conditions of the deal made with OIO.

The salient bit of that press release I reproduce below, the most important bits in bold.

-------

Without admitting or denying the findings, Agria agreed to pay a $3 million penalty and cooperate with the Commission’s staff in future investigations. The SEC’s order as to Lai found that he violated antifraud provisions of the federal securities laws. Without admitting or denying the findings, Lai agreed to pay a $400,000 penalty and be barred for a period of five years from acting as an officer or director of any public company (in the USA).

------

Agria and Lai have admitted nothing! The SEC made various findings that were not proved. Rather than being dragged through the courts, Lai has made various payments that do not equate to guilt on any record. Lai has not been proved guilty on any of these SEC charges.

SNOOPY

[Balance]

The salient bit of that press release I reproduce below, the most important bits in bold.

-------

Without admitting or denying the findings, Agria agreed to pay a $3 million penalty and cooperate with the Commission’s staff in future investigations. The SEC’s order as to Lai found that he violated antifraud provisions of the federal securities laws. Without admitting or denying the findings, Lai agreed to pay a $400,000 penalty and be barred for a period of five years from acting as an officer or director of any public company (in the USA).

------

Agria and Lai have admitted nothing! The SEC made various findings that were not proved. Rather than being dragged through the courts, Lai has made various payments that do not equate to guilt on any record. Lai has not been proved guilty on any of these SEC charges.

SNOOPY

http://www.sharechat.co.nz/article/2...e-settled.html

And Fay Richwhite paid $20m without admitting anything also.

Guess what happened to Fay Richwite & gang after the 'no liability, no admission' deal?

https://www.nzherald.co.nz/business/...jectid=3577312

Guess Owen Glenn should have been a lot more careful?

https://www.stuff.co.nz/business/107...-v-eric-watson

[Snoopy]

http://www.sharechat.co.nz/article/2...e-settled.html

And Fay Richwhite paid $20m without admitting anything also.

Guess what happened to Fay Richwite & gang after the 'no liability, no admission' deal?

https://www.nzherald.co.nz/business/...jectid=3577312

Guess Owen Glenn should have been a lot more careful?

https://www.stuff.co.nz/business/107...-v-eric-watson

These separate 'indiscretions' you have outlined by David Richwhite and Eric Watson both occurred in New Zealand and brushed up against NZ legal authorities. The 'indiscretions' committed by Alan Lai did not occur in New Zealand and did not relate to a New Zealand company and no NZ legal authority was involved. Lai has a clean record in N.Z.. The other two don't.

SNOOPY

[percy]

SNOOPY,
Have you read last Friday's NBR with the article by Tim Hunter about how naughty a boy was former chairman Alan Lai.?

Perhaps one of Tim Hunter's best.

Above posted 28-05-2019.
Snoopy read it.