PGGW issue seen as relatively successful

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Trading in PGG Wrightson's rights for new shares ended yesterday, marking a significant point in what is now seen as a successful capital raising.

The rights issue will remove a debt cloud from the rural services firm, and should see PGGW's share price increase, market commentators say.

PGGW's $249.4 million capital raising, including the $180.7m rights issue, will enable it to pay back $200m to banks in March 2010.

The fact that a significant number of the rights have been taken up by investors has also removed any pressure on underwriters.

The rights have been trading since November 27 at prices between 10c and 18.3c and on daily volumes of between two million and 17 million-plus.

They closed yesterday at a peak of 18.3c, up 4.8c on the day.

Hamilton Hindin Greene director Grant Williamson said the fact the rights held by cornerstone shareholders had been retained or traded between those parties meant there was less pressure on other shareholders.

"[Trading] has fluctuated a wee bit. What has probably surprised is that on Friday we started to see a reasonable number of rights sellers come into the market," he said.

"Most of them were really just holding back, waiting for the last few days . . ."

The selling pressure on PGGW head shares should now disappear, given the relative success of the capital raising.

"I think it's pretty much a forgone conclusion the underwriters will not end up with a large overhang, with the large holders accounting for all their rights."

Under the capital plan, Chinese firm Agria Corp will jump to the top of the share register with a 19 per cent stake.

It will take that spot from Rural Portfolio Investments, owned by Craig Norgate and the McConnon family, which falls to No 3 spot on the share register with a 12.4 per cent stake.

Pyne Gould Corp is taking up its rights to maintain its stake at about 18.3 per cent.

PGGW's rights holders have to pay 45c to convert each right into a new share, with the rights trading at a discount to the head shares, which yesterday closed 3c higher at 63c, within a 12-month trading range of 55c to 161c.

"Historically, when you look at rights issues, you normally get a nice move up in the head shares once the rights finish trading," Williamson said.

"So I think in coming weeks we should see a reasonable lift in the share price from the current very low levels."

The ability of PGGW to meet its $200m debt obligation in March would help remove the discount from the share price, Williamson added.

Morningstar senior equities analyst Nachi Moghe said PGGW would also benefit from its exposure to the commodities sector, and the fact that a US- based legal challenge against shareholder Agria seemed to have disappeared.

"I think it's possible [the share price] might possibly go about 10 per cent higher from current levels . . . I've got an outperform [recommendation] at the current price," Moghe said.

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