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Wrightson to sell seeds unit for $439M to Danish co-op; may distribute cash

Monday 6th August 2018

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PGG Wrightson has agreed to sell its seed and grain business to Danish cooperative DLF Seeds for $421 million in cash and $18 of debt repayment, and signalled it may return up to $292 million to its shareholders.

The Christchurch-based rural services company said the sale of its PGG Wrightson Seeds business follows several expressions of interest received from international parties as part of a strategic review of its business underway with Credit Suisse (Australia) and First NZ Capital. 

For PGG Wrightson, the sale frees up cash for debt reduction, distribution to shareholders and strategic growth opportunities while retaining access to the seeds business through a long-term distribution agreement as well as ongoing royalty payments from a larger business. Meanwhile, for DLF Seeds, the acquisition gives the Northern Hemisphere-based business access to the leading temperate forage seed operation in the Southern Hemisphere to create a strong global offering for customers.

"The agreement represents a transaction that would deliver significant value to PGW while also enabling the PGW Seeds business to benefit immensely from being part of an impressive global seeds operation," PGG Wrightson deputy chair Trevor Burt said in a statement. "The DLF Seeds offer was particularly compelling in terms of the value it would deliver to PGW shareholders."

The $421 million sale proceeds exceed the book value of PGW Seeds’ net assets which were estimated at $285 million as at June 30 2018.  PGG Wrightson expects to have a net cash balance of about $270 million following the sale and could distribute as much as $292 million to shareholders, the company said.

The deal is subject to several conditions, including approvals from shareholders, New Zealand's Overseas Investment Office, antitrust regulators in New Zealand, Australia and South America, consent from PGW Seeds' joint venture partners and PGG Wrightson's banking syndicate.

The PGG Wrightson board unanimously supported the conditional agreement, which chair Trevor Burt said was "very attractive".

The board has engaged KordaMentha to prepare an independent appraisal report on the merits of the transaction for the company's shareholders, ahead of a meeting and vote expected in October.

PGG Wrightson shares last traded at 64 cents, having increased 6.7 percent over the past year.

(BusinessDesk)

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