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PGG Wrightson ditched by Farming Systems

Thursday 14th October 2010

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PGG Wrightson's shares sank after NZ Farming Systems Uruguay, the dairy farm developer it spawned, severed ties with its former manager.

Farming Systems chairman John Parker told shareholders Singaporean commodities company Olam International, which bought 78% of the farm manager last month, changed the terms of the management contract buy-out from Wrightson, opting out of a preferred supplier agreement.

Wrightson will get a $4.6 million payment, and will receive some $20 million of outstanding fees by the end of the year as part of the severance package. Its shares dropped 1.7% to 57 cents. Farming Systems fell 3.2% to 61 cents, extending its slide since Olam completed its 70 cents-a-share takeover offer.

Farming Systems turned down the opportunity to buy advice and consulting services from Wrightson until 2015 and to keep New Zealand's biggest rural services company as preferred supplier until 2019.

"The preferred supplier agreement no longer exists in any formal form, but the management contract will be internalised as envisaged, albeit at a slightly higher cost and any monies due to PGW will be paid before the end of the calendar year," Parker said.

"We envisage agreement of all parties being finalised within the next couple of weeks.

The buy-out of the management contract was to be voted on at today's annual meeting, but the changes, negotiated by Olam last night, meant the parties won't be related anymore and don't require investor approval, Parker said.

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