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Chinese Company Takes Stake In PGG Wrightson

Fuseworks Media
Fuseworks Media

Wellington, Oct 16 NZPA - Beijing-based Agria Corporation aims to be a cornerstone shareholder in PGG Wrightson, after initially taking a 13 percent stake in New Zealand's largest rural services business.

The two companies today 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.

O ne 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 is a China-based agricultural solutions provider, 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.

"Both parties' aspiration is to become a significant shareholder in PGG Wrightson over time," the companies said.

The PGG Wrightson board was considering options for an equity raising such as a rights issue, with an announcement possible by early next month.

"The co-operation agreement identifies a range of opportunities for PGG Wrightson and Agria to work together to create value. It will provide a framework in which intellectual property, management know-how and financial resources can be deployed jointly and for mutual benefit...," PGG Wrightson chairman Keith Smith said.

` `This programme will be very consistent with the existing business platform of PGG Wrightson.

"Our primary focus will remain on our customers in New Zealand, Australia and South America -- and on improving performance in our existing businesses and markets while exploring new opportunities under the co-operation agreement. Agria is investing on the same basis.

"PGG Wrightson has for some time been looking to establish a strategy and business platform for entry into China. This agreement and the relationship with Agria will enable that aspiration to be met."

Agria chairman Alan Lai said China never had a lack of growth opportunities and market potential but "success requires hands on operational expertise that this partnership brings".

"The quality of international operational expertise to which Agria will gain access is not available in agricultural services in China, and will serve to strengthen Agria's capabilities in the implementation of its strategic direction.

"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, with annual turnover of $1.3 billion, was formed in 2005 through the merger of long-established companies Pyne Gould Guinness and Wrightson. It has operations in Australia and South America.

Its shares jumped 15c to 80c in early trading following the Agria announcement.

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 US$2.19 on the latest NYSE session.

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