Deal to sell PGG Wrightson Finance to Heartland

Tuesday 14th June 2011 4 Comments

PGG Wrightson is selling its finance subsidiary PGG Wrightson Finance to Heartland New Zealand subsidiary Heartland Building Society, in a deal expected to be worth about $100 million.

The final purchase price would be an amount equal to the adjusted net tangible assets of PGG Wrightson Finance at the August 31 expected completion date of the transaction, PGG Wrightson said today.

In connection with the transaction PGG Wrightson Finance would transfer certain loans, with a combined value of about $96.5 million, to a wholly owned PGG Wrightson special purpose vehicle, which would work to realise or refinance those facilities in the short to medium term.

If sale conditions were met, Heartland would become the issuer of the debt securities now issued by PGG Wrightson Finance and would take over all aspects of its business, including its loan book and staff.

PGG Wrightson said it and Heartland had agreed to enter into a distribution and services agreement, under which Heartland would make financial products and services available to PGG Wrightson clients in support of their farming activities.

Among conditions of the deal are approval from PGG Wrightson and Heartland shareholders, Heartland capital raising and relevant regulatory consents. Chinese firm Agria has just over half the shares in PGG Wrightson.

PGG Wrightson chairman Sir John Anderson said the proposal would "significantly deleverage and de-risk PGG Wrightson's current financial position".

At the same time PGG Wrightson Finance would form part of a much larger financial institution that specialised in many of the markets PGG Wrightson Finance operated in.

PGG Wrightson had adopted a strategy of focusing on its core business activities in agricultural products and services, Sir John said.

An independent adviser's report on the deal was being posted to PGG Wrightson shareholders today, with a shareholders' meeting scheduled for June 28 in Christchurch.

Heartland was formed in January following the merger of Canterbury Building Society, Marac Finance and Southern Cross Building Society. Its goal was to create a New Zealand controlled, NZX-listed bank meeting the needs of the rural community.

NZPA

Comments from our readers

On 15 June 2011 at 10:23 am Ivan said:

If Wrightson Finance is such a good company, why are they selling it ?

On 15 June 2011 at 11:24 am steve said:

To reduce the parent's debt position Ivan.

On 17 June 2011 at 10:14 am Ivan said:

Steve, I take it you believe everything these people tell you. 90pc of finance companies have gone under. I take it, you believed everything their management said as well.

On 27 June 2011 at 3:34 pm Brent said:

Will PGGW get a better finance or credit rating once it has unloaded its finance arm, I suspect not as that are going to either retain or guarantee a certain amount of the more risky loans, doesn't sound right to me??