The partial takeover of PGG Wrightson took another twist late this week with speculation the rural services company could be split in two.
Hamilton-based Livestock Improvement Corporation (LIC) confirmed its support for the Agria/New Hope/Ngai Tahu Holdings partial takeover offer for a 50.01% shareholding in PGG Wrightson, through a $10 million loan to Agria Singapore.
Ngai Tahu planned to take a cornerstone shareholding in PGGW through a joint venture with Chinese companies.
LIC chairman Mark Dewdney confirmed the dairy farmer-owned co-operative had supported the Agria bid through a $10 million loan to Agria Singapore, which is making the current partial takeover offer for PGGW.
The loan is for a term of 18 months, with security provided by Agria Singapore. LIC will appoint one director to the board of Agria Singapore.
LIC's prime strategic interest was in supporting the PGGW agri-tech businesses - seeds, agri-feeds and grain. It had no plan to invest directly in the overall businesses of PGGW (rural supplies, real estate, livestock and finance), Mr Dewdney said.
"LIC is not becoming a shareholder in either PGGW or Agria Singapore, and our intention would only be to invest directly into a separate PGGW agri-tech business, if such a structure is ever established by PGGW," he said.
Craigs Investment Partners broker Chris Timms said there had been plenty of market speculation about what would come out of the takeover proposal with some "left field" players only being heard of this week.
The agri-tech businesses, with seeds in particular, were regarded as the "jewel in the crown" for PGGW and would always have been the most sought after.
"They have good technology in the business and it is the high-quality side of the business. I suspect that is why they [Agria] want a stake. They will have easier access to the seeds and grains."
The seed business had been the most resilient in past years, he said.
Ngai Tahu wanted to get alongside the Chinese investors but also broaden its exposure to New Zealand's rural sector and LIC saw the opportunity to get involved in a quality part of the business, Mr Timms said.
However, he believed that a 75% vote would be needed for a structural separation of the company and that a 50.1% stake would not be enough.
