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Agria Aiming For Cornerstone Shareholding, Not Controlling Stake

Fuseworks Media
Fuseworks Media

Wellington, Oct 16 NZPA - Beijing-based Agria Corporation is aiming to be a cornerstone shareholder in PGG Wrightson, but executives are discounting any possibility of Agria becoming controlling shareholder.

Today the two companies announced Agria was taking a 13 percent stake in PGG Wrightson, this country's largest rural services business.

They said they had signed an agreement for Agria to invest $36 million in PGG Wrightson through a share placement at 88c per share and form a strategic partnership.

One of the conditions of the investment was Agria being satisfied that sufficient funds would be raised through equity raising and other sources for PGG Wrightson to repay a $200m debt facility by next March 31. Agria's investment will go towards the debt repayment.

An announcement on equity raising is expected early next month.

PGG Wrightson chairman Keith Smith ruled out concerns the deal could eventually become a takeover or involve asset stripping.

But he did say, " Both parties aspiration is for Agria to become a significant shareholder in PGG Wrightson over time".

PGG Wrightson managing director Tim Miles said it was not envisaged by either Wrightson or Agria that Agria would take a controlling interest, but Agria would like a "significant" interest.

"I think they'd like to go further if that opportunity presented itself," Mr Miles said.

But PGG Wrightson's core was in this country and it intended to remain a New Zealand business.

The deal would "more likely" create jobs in PGG Wrightson's existing business in this country, South America and Australia, he said.

"There's no inference here that any parts of our business are going to be picked up and moved somewhere else, to China or anywhere else."

He expected "only good things" to come out of the deal for PGG Wrightson's staff, and good things and opportunities for agriculture in this country generally.

Agria is listed on the New York Stock Exchange and engaged in research and development, production and sale of upstream agricultural products.

Under the partnership the two companies would co-operate on development and international commercialisation of seed cultivars; development of livestock demand in China and export of livestock from New Zealand, Australia, South America and other markets; and the establishment of livestock trading systems in China using PGG Wrightson's expertise in auctions.

Co-operation between the two companies could also involve examining additional funding options through third party sources to help the growth of PGG Wrightson Finance.

Mr Smith said PGG Wrightson had for some time been looking to establish a strategy and business platform for entry into China. Agria chairman Alan Lai said the quality of international operational expertise to which Agria would gain access was not available in agricultural services in China.

"China is a world leader in many areas of agriculture, including cultivation of rice, cotton and to a certain extent corn, and Agria has secured access to world class research through relationships with leading research institutes, including China National Academy of Agricultural Sciences.

"I believe by partnering with PGG Wrightson we can best accelerate the commercialisation of these opportunities."

PGG Wrightson's shares were up 14c to 79c in mid-afternoon trade.

In its latest financial results, Agria reported total revenues of $US47 million for the nine months ended September 30. Its share price closed 3c higher to $US2.19 on the latest NYSE session.

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