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PGG Wrightson Capital Raising To Be Followed By Board Changes

Fuseworks Media
Fuseworks Media

Wellington, Nov 20 NZPA - PGG Wrightson has unveiled a $249.4 million recapitalisation to be followed by a boardroom shake-up reflecting radically-altered ownership.

The rural services firm said it is raising enough money to give it a conservative position and for its finance company to meet new regulatory requirements.

But it no longer has appetite to be a major agent of change in the meat industry.

Managing director Tim Miles said a consolidation of the meat industry needed to happen.

"But it won't be with us investing large-scale in anything any time soon. That's the reality," he said.

The capital raising has three prongs. A $180.7m nine-for-eight renounceable right issue at 45c a share fully underwritten by UBS New Zealand and First NZ Capital Securities, which closes off just before Christmas on December 23. The company's existing shares last traded at 65c before being halted.

There is also a sale of 41.1m new shares to Beijing-based Agria Corporation for 88c each, raising $36.2m, announced last month.

A further $32.5m will be raised by selling convertible redeemable notes to Agria. This money will recapitalise PGG Wrightson Finance.

"None of this at any time stops PGG Wrightson from selling the finance business," the company said.

Agria ends up with 19 percent of the company, Pyne Gould Corp (PGC) takes up its rights but is diluted by the placement to 18.3 percent from 20.7 percent.

Rural Portfolio Investment (RPI), the vehicle of Craig Norgate, falls to 11.8 percent from 27.5 percent.

A board shakeup occurs in the new year. Mr Norgate has already moved from chairman to director. The new board will have eight members, plus the managing director.

It will have two directors from Agria, two from PGC and three independent directors. It was not spelt out if RPI will have a seat at the table. The chairmanship, to be an independent, will be re-assessed when the final composition of the board is known.

PGG Wrightson's need for recapitalisation arose out of a failed merger with Silver Fern Farms and having high debt when the economy turned down and credit became constrained.

The recapitalisation will allow for a reduction in net debt outstanding during the year to June 30, 2010 of about $277m.

"It is a very, very strong position, we believe, to take the company forward," said Jason Dale, the chief financial officer.

Mr Miles said difficult trading conditions experienced from the final quarter of the 2009 year had persisted into the current trading period. The company's busiest period is autumn.

Figures in the simplified disclosure prospectus registered today put operating earnings before income, taxation, depreciation and amortisation at $73.4m for the year to the end of June 2010, compared with $80.9m for the 2009 year.

A trading halt on PGG Wrightson shares is to remain in place until the outcome of the bookbuild to sell some RPI rights.

The completion of a purchase of a farm in Brazil near NZ Farming Systems Uruguay's hub in Uruguay, is delayed due to the need for approvals.

"The reality is in the current market we would like to dispose of that property," the company said.

The company is also looking at selling saleyard and farming assets. Equity interests in some saleyards will be sold back to other holders in the saleyard.

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