Rural sector company PGG-Wrightson could yet find itself ‘‘taken over'' by its chairman, who has launched a takeover bid for New York listed Agria Corporation, which already has a 50.22% stake in PGG-Wrightson (PGW).
Two weeks ago Agria Corporation notified the New York stock exchange of a non-binding takeover proposal received from its biggest shareholder Guanglin ‘‘Alan'' Lai, who also serves as the chairman of PGW.
Agria Corp indirectly holds 50.22% of PGW through Agria (Singapore) Pte Ltd.
Craigs Investment Partners broker Peter McIntyre said it was an ‘‘unusual situation'', and if Mr Lai was successful in his tilt for Agria Corp, there was potential for a PGW takeover bid.
‘‘It's on the cards, PGW could become a takeover play.''
On the value in PGW's 40c per share, Mr McIntyre said if it can deliver and maintain its expected 10% dividend, and also its October guidance on $61million-$67million in earnings before interest, tax, depreciation and amortisation, it ‘‘could be an attractive target for corporate activity [takeover].''
‘‘The long-term investment theme for agriculture is strong, but the sector is volatile and cyclical. Maybe his [Lai] timing is right,'' Mr McIntyre said.
In the October guidance of PGW, Mr Lai said there were improvements to group operations and the company was ‘‘on the right path'' and had the correct balance between operation execution, continuous improvement and growth.
The independent directors of PGW, Bruce Irvine, John Nichol and Ronald Seah, have formed a committee to consider and assess the implications, if any, that Mr Lai's proposal for Agria could have for PGW.
Committee chairman Bruce Irvine said it was too early to say whether the proposal will have takeovers code implications for PGW, in a brief note to the market this week.
Agria Corp is Cayman Islands-registered, Hong Kong-headquartered and trades on the NYSE. It had turnover of $US1.02billion in 2014, $US944.7million in 2015, and booked a 44% fall in profit in 2015, to $14.6million.
●Agria's annual report for 2015, lodged in the US, said a ‘‘substantial portion'' of its revenue was derived from PGW, while its interests are spread around Australia and South America.
Mr Lai is executive chairman of Agria Corp's board of directors and has business interests in China and Hong Kong, primarily in animation, logistics and transport and pharmaceuticals.
