PGW - PGG Wrightson

[Balance]

Balance I accept that the Chinese government could put money into a takeover of PGW. But you haven't come up with any reason why they should do it. PGW is already controlled by Agria, so why would Agria spend any more money for no additional benefit? The partnership between the Chinese government and Agria looks to me to be an uneasy one. Very different to the Singaporean government/Olam situation.

SNOOPY

Good robust discussion, Snoopy.

I think it really is case of looking behind the scenes more when you are evaluating and analyzing China companies and how they operate.

The debt level of Agria is not an impediment to a takeover of PGW by the Chinese - New Hope is the one really in charge behind the scenes in my view. And they are a big bugger - but opaque as they are a private group.

New Hope and the China government will pay Agria a finder's fee for PGW - in the meantime, get set!

[Snoopy]

The debt level of Agria is not an impediment to a takeover of PGW by the Chinese - New Hope is the one really in charge behind the scenes in my view. And they are a big bugger - but opaque as they are a private group.

New Hope and the China government will pay Agria a finder's fee for PGW - in the meantime, get set!

Agria has continued to fall in share price. Last Thursday they fell nearly 8% in a single day down to an all time low of 68c, although they have since recovered to close the week at 74c. Nevertheless even at that closing price they are now valued at just $US41m, a 15% decline in value over the week. New Hope have shares in Agria Singapore, but they have a put option back to Agria USA that will require Agria to buy back those shares in Agria Singapore at issue price. Far from being the saviour of Agria , New Hope could tip them over the edge at any time. I thought Agria might have 2-3 months to live under their current capital structure, but things may be moving faster than even the pessimists thought likely. Perhaps Alan Lai only has a matter of days left at the Agria helm now?

Meanwhile the optimists have noted Alan Lai's rather large top hat and are speculating at the colour of the rabbit he has in there! A white fluffy bid for the rest of PGW almost inevitable now?

SNOOPY

[Balance]

Agria has continued to fall in share price. Last Thursday they fell nearly 8% in a single day down to an all time low of 68c, although they have since recovered to close the week at 74c. Nevertheless even at that closing price they are now valued at just $US41m, a 15% decline in value over the week. New Hope have shares in Agria Singapore, but they have a put option back to Agria USA that will require Agria to buy back those shares in Agria Singapore at issue price. Far from being the saviour of Agria , New Hope could tip them over the edge at any time. I thought Agria might have 2-3 months to live under their current capital structure, but things may be moving faster than even the pessimists thought likely. Perhaps Alan Li only has a matter of days left at the Agria helm now?

Meanwhile the optimists have noted Alan Li's rather large to hat and are speculating at the colour of the rabbit he has in there! A white fluffy bid for the rest of PGW almost inevitable now?

SNOOPY

Exactly as New Hope wants it to be.

And if Agria's share price is of any relevance, bid 2000 to buy at 60c and offer 1200 to sell at $1.20. So they could just buy 1000 shares and make the price $1.20!

[Snoopy]

Exactly as New Hope wants it to be.

Balance, you are speaking as though New Hope has set up Agria and Alan Lai as a kind of veneer front man, a layer that can been peeled away should things go bad. The thing that puzzles me is this. It was always going to take more that two years to get the PGW seeds business to have any meaningful scale in China. So Agria has to play the game with an extended time horizon in mind.

The value of PGW shares may indeed be 60c (the price Agria paid for control of PGW) each 'eventually'. But that 'eventually' was always going to be a longer time frame than the rolling over period of the Agria bank loans. The logical way to go would be for PGW Agriservices to be floated off to Mom and Pop kiwi investors as a separate company within two years of Agria gaining control of PGW. That would inject the cash back into PGW Agritech. In turn Agria could make a reverse takeover for PGW Agritech. That would effectively end Agria's balance sheet woes. The transfer of the primary listing of 'PGW Agritech' to Singapore would then be a straightforward matter.

Then the long grind to get rid of the remaining NZ shareholders would begin by cancelling dividends, analyst coverage would cease in NZ and eventually the NZ shareholders remaining on the register would be squeezed out at a pittance. Instead Agria has remained unusually polite, even supporting Sir John Anderson as a continuing independent Chairman of the company they control (PGW). OK we have many more Agria appointees to the board now, but where is their influence on the direction of PGW? I know the Chinese pay the long game. But those playing the long game must still hold onto their hands while the game is in progress. It looks to me as though Agria will run out of cards before the game is complete. I don't believe that New Hope is well enough positioned should Alan Lai be asked to leave the gaming table before the long game is over.

SNOOPY

[Snoopy]

And if Agria's share price is of any relevance, bid 2000 to buy at 60c and offer 1200 to sell at $1.20. So they could just buy 1000 shares and make the price $1.20!

The relevence of Agria's share price is the effect that might have on the price setting of any new Agria shares that might be issued to shore up Agria's balance sheet. It would be easier to raise new capital if the Agria share price was $1.20 as opposed to 74c, true enough. But I think you need to consider who would be lining up to put more capital into Agria. My pick is that small shareholders having seen their investment decline in market value by nearly 95% (Agria floated at a market price around $US14) would not be keen to dip their hands into their pockets again. The only big player I can see who does have the ability to bail out Agria is New Hope. Why would New Hope indulge in a campaign to boost the Agria share price? Would it not be better for New Hope to put up new capital at a deeply discounted price? It would be easier to dilute the equity of existing shareholders if done this way, would it not? As New Hope does not hold a meaningful stake in Agria USA, the maximum bang for their buck would be obtained by shafting existing Agria shareholders as much as they can. I see that as the logical way for New Hope to behave, as Alan Lai is eased into graceful face saving retirement.

The problem is the above scenario is a nightmare for the existing small shareholders in Agria.

SNOOPY

[Balance]

Balance, you are speaking as though New Hope has set up Agria and Alan Li as a kind of veneer front man, a layer that can been peeled away should things go bad. The thing that puzzles me is this. It was always going to take more that two years to get the PGW seeds business to have any meaningful scale in China. So Agria has to play the game with an extended time horizon in mind.

The value of PGW shares may indeed be 60c (the price Agria paid for control of PGW) each 'eventually'. But that 'eventually' was always going to be a longer time frame than the rolling over period of the Agria bank loans. The logical way to go would be for PGW Agriservices to be floated off to Mom and Pop kiwi investors as a separate company within two years of Agria gaining control of PGW. That would inject the cash back into PGW Agritech. In turn Agria could make a reverse takeover for PGW Agritech. That would effectively end Agria's balance sheet woes. The transfer of the primary listing of 'PGW Agritech' to Singapore would then be a straightforward matter.

Then the long grind to get rid of the remaining NZ shareholders would begin by cancelling dividends, analyst coverage would cease in NZ and eventually the NZ shareholders remaining on the register would be squeezed out at a pittance. Instead Agria has remained unusually polite, even supporting Sir John Anderson as a continuing independent Chairman of the company they control (PGW). OK we have many more Agria appointees to the board now, but where is their influence on the direction of PGW? I know the Chinese pay the long game. But those playing the long game must still hold onto their hands while the game is in progress. It looks to me as though Agria will run out of cards before the game is complete. I don't believe that New Hope is well enough positioned should Alan Li be asked to leave the gaming table before the long game is over.

SNOOPY

I think you should have a look at the shareholders' agreement between Agria and New Hope :

https://www.nzx.com/companies/PGW/announcements/210728

New Hope is poised and waiting.

[Snoopy]

I think you should have a look at the shareholders' agreement between Agria and New Hope :

https://www.nzx.com/companies/PGW/announcements/210728

New Hope is poised and waiting.

The way I see it we are up to Chapter 10 in the life story of Agria. The question is what happens with Agria in Chapter 11?

In your reference Balance there is the following quote:
"On 28 June 2011 Agria Group Limited and New Hope International entered into an agreement (Charge Agreement) giving New Hope International a charge over Agria Group Limited’s Agria Asia Investments Limited shares (Charge). The Charge is given to secure Agria Group Limited’s obligations under the Put Option."

If you now go back to my post 1916 on this thread, the FY2011 20F filing for Agria states:

"New Hope International has the right to sell its shares in Agria Asia to Agria Group Limited, or Agria Group, on the terms and conditions provided in the shareholders agreement at a certain repurchase price determined pursuant to a supplemental agreement entered into between Agria Group and New Hope International in June 2011. The obligation of Agria Group in connection with this put option held by New Hope International may be on terms that are not commercially favorable to us."

To me this illustrates the lop sided nature of the agreement between Agria and New Hope. But if Agria USA goes into Chapter 11, do these agreements still apply?

SNOOPY

[Balance]

The way I see it we are up to Chapter 10 in the life story of Agria. The question is what happens with Agria in Chapter 11?

In your reference Balance there is the following quote:
"On 28 June 2011 Agria Group Limited and New Hope International entered into an agreement (Charge Agreement) giving New Hope International a charge over Agria Group Limited’s Agria Asia Investments Limited shares (Charge). The Charge is given to secure Agria Group Limited’s obligations under the Put Option."

If you now go back to my post 1916 on this thread, the FY2011 20F filing for Agria states:

"New Hope International has the right to sell its shares in Agria Asia to Agria Group Limited, or Agria Group, on the terms and conditions provided in the shareholders agreement at a certain repurchase price determined pursuant to a supplemental agreement entered into between Agria Group and New Hope International in June 2011. The obligation of Agria Group in connection with this put option held by New Hope International may be on terms that are not commercially favorable to us."

To me this illustrates the lop sided nature of the agreement between Agria and New Hope. But if Agria USA goes into Chapter 11, do these agreements still apply?

SNOOPY

Hence, my assessment you have to look at New Hope (and China government behind the scenes) rather than Agria.

Minorities will be protected by the presence of Selwyn Cushing, Gould and Ngai Tahu on the Borad and share register until New Hope makes its move.

[Snoopy]

I think you should have a look at the shareholders' agreement between Agria and New Hope :

https://www.nzx.com/companies/PGW/announcements/210728

New Hope is poised and waiting.

From you reference balance:
"Under the terms of the Shareholders Agreement, if Agria Corporation wishes to transfer its Agria Group Limited shares to a third party it must first offer the shares to New Hope International."

The problem is Agria Asia has not been able to improve the price of the underlying asset (PGW) since purchase. So why would Agria want to sell their stake in Agria Asia now, and crystallize a huge loss? Surely Agria will be doing everything in its power not to sell its PGW stake to anyone?

SNOOPY

[Balance]

From you reference balance:
"Under the terms of the Shareholders Agreement, if Agria Corporation wishes to transfer its Agria Group Limited shares to a third party it must first offer the shares to New Hope International."

The problem is Agria Asia has not been able to improve the price of the underlying asset (PGW) since purchase. So why would Agria want to sell their stake in Agria Asia now, and crystallize a huge loss? Surely Agria will be doing everything in its power not to sell its PGW stake to anyone?

SNOOPY

Per your assessment of Agria's financial position, it may have no option or choice.

Don't forget that the Canadians (Agrium) are in the background too.