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PGG Wrightson to raise $180 million in discounted rights issue that needs investor backing

Friday 20th November 2009

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PGG Wrightson, the rural services company aiming to shed debt to woo a new cornerstone investor, plans to raise $180 million in a rights issue at a deep discount.

Shareholders will be offered nine shares for every eight held at 45 cents apiece, a 31% discount to their trading price yesterday of 65 cents, Wrightson said in a statement today. The issue is for 401.5 million shares and amounts to 81% of the company’s current market capitalisation.

The capital raising is designed to strengthen the balance sheet of Wrightson, which has $200 million of debt due in March. Chinese-based seed and agricultural research company Agria has agreed to acquire a 13% stake in the company for $36 million in a deal that hinges of Wrightson’s ability to meet its debt payments.

Wrightson needs the support of major shareholders Pyne Gould Corp., with 21%, and Rural Portfolio Investments, the vehicle of former Wrightson chairman Craig Norgate and Baird McConnon, which holds 27.5%. Both have been forced to take their own steps to strengthen their balance sheets. If Wrightson can pull off the capital raising, it will emerge a stronger company though still tied to the swings in cycles of rural commodities.

“Tim Miles has a very good reputation as CEO – he’s moved into a difficult are of a difficult industry and made some reasonable changes to the business,” said Paul Harrison, who overseas $180 million at BT Funds Management in Auckland. “But he’s been held back by the capital structure – hopefully this will fix it.”

Harrison said he is still assessing the offer. “Agriculture has extra risk – it has good and bad years so it should be valued on multiples of industrial companies,” he said.

Agria’s proposal to take a stake in the company is awaiting Overseas Investment Office approval.

Shares of Pyne Gould and the preference shares of Rural Portfolio Capital, a subsidiary of RPI, were halted for Wrightson’s proposal. A reshuffle of Wrightson’s board is also on the cards.

Businesswire.co.nz

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