PGGW 'still a NZ Inc story'

22:21, Oct 18 2009

PGG Wrightson would remain a "New Zealand Inc story" despite a Chinese company scooping up a 13 per cent stake in the agricultural services firm, an analyst says.

But opponents believe Wrightson's decision to sell $36 million of new shares to young Chinese agriculture company Agria Corporation is another case of New Zealand's production sector potentially falling into foreign hands.

The sale announced on Friday is the first part of a larger equity raising plan in response to demands from Wrightson's bankers to repay $200m of debt by March.

Forsyth Barr head of research Rob Mercer said an Asian shareholder was a obvious target for Wrightson as it tried to raise new money.

New Zealand's point of difference globally was its agricultural, assets-rich economy which was attractive to Asian investors such as Agria, Mr Mercer said.

The directors of both companies were adamant it was not a takeover bid for Wrightson.

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"You have got to take them at their word," Mr Mercer said.

The directors were sending a "clear message that it is about the existing shareholders" in recapitalising the company, he said.

"Reading between the lines, what that is saying is that, yes, we have got someone on board who wants to be a passive shareholder in the short to medium term. That might change as circumstances require."

Two large New Zealand shareholders, interests associated with businessman Craig Norgate and Dunedin's McConnon family and Pyne Gould Corporation together own nearly 49 per cent of Wrightson.

"This is still a New Zealand Inc story, with a positive long term future" despite Wrightson being caught out with too much debt at a time of falling commodity prices and an economic downturn, Mr Mercer said.

Agria is registered in the Cayman Islands and reportedly runs its agricultural operations in China through a contract with a Chinese company called Primalights III, owned by four of its managers.

Agria is facing four class actions from a group of American investors relating to its initial public offer in 2007.

The company is also investigating allegations by a former employee about some of Primalights III's financial dealings.

Wrightson and Agria plan to jointly develop and internationally commercialise seed cultivars, develop livestock trade to China from New Zealand, Australia and South America, and use Wrightson's expertise to establish livestock trading systems in China.

Farmers were unconcerned by a foreign investor buying into the 150-year old company.

Federated Farmers president Don Nicholson said Wrightson could have taken their intellectual property in animal and seed development overseas at any time.

"What they do internationally is their business, really," Mr Nicholson said.

There were many examples of New Zealand technologies being used internationally, including pine tree and kiwifruit products, as the world becomes increasingly borderless in terms of intellectual property, Mr Nicholson said.

"You can't pull the shutters down on an economy like New Zealand, that is probably the bottom line, you actually have to be thinking globally by acting globally."

Campaign Against Foreign Control of Aotearoa spokesman Murray Horton said the deal was another example of the "alienation of the New Zealand economy from New Zealanders".

Chinese white goods manufacturer Haier has taken a cornerstone stake in troubled Fisher and Paykel as a part of a rescue deal for the Dunedin-based appliance maker, he said.

Chinese were also thought to be interested in buying New Zealand's biggest dairy farm business, Crafar Farms, owned by the Crafar family, which was put in receivership this month.

Agria would eventually exert control "to a greater or lesser degree" including a say in the way the company operated, Mr Horton said.

"And further down that track we will see decisions being made in the interests of the foreign shareholders, as opposed to, necessarily, the interest of New Zealand."

The Dominion Post