Friday 24th June 2011 |
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The New Zealand Shareholders Association (NZSA) has poured cold water the proposed sale of the PGW finance arm to Heartland Building Society.
Chairman John Hawkins said, "This is another related party transaction of the type which has almost knee-capped our leading rural servicing business over the past five years at a time when NZ agriculture is enjoying record returns. We can see some strategic merit in moving the finance arm to Heartland, but this is not the best deal to achieve that."
Hawkins said the Association questioned how a modestly profitable asset that brings with it a large pool of performing loans, market dominance and significant funding lines could fail to fetch any goodwill at all.
The company has claimed that a sale at asset value only is the best that could be arranged.
Hawkins said "that seems extraordinarily pessimistic when PGW are transferring a loan book of $491million with all the doubtful liabilities removed or guaranteed by PGW."
He pointed out that eighteen really suspect loans totalling $90 million will remain with PGW. PGW will also guarantee a further eight loans totalling some $30 million. There seems to be a pretty significant transfer of assets while retaining most of the risk, he said.
The association said that this will undoubtedly be a good deal for Pyne Gould Corporation and Heartland. But it cautioned PGW shareholders to consider the implications for their own company very carefully before deciding whether or not to approve the deal.
The Shareholders Association was likely to vote its proxies against the plan, and hoped to send the directors back to come up with a more realistic offer for PGW shareholders to consider, he said.
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