A full 100% takeover offer for farm services company PGG-Wrightson by Chinese interests has been ruled out - for now.
On Christmas Eve, Chinese agribusiness companies Agria, of Beijing, and New Hope Group, of Sichuan, launched a joint bid to take Agria's stake in listed PGGW from 19.01% to a controlling interest of 50.01% by offering 60c a share - for a total $136.5 million.
Already, the joint bidders' stake has increased to about 37% as PGGW's second-largest shareholder, Pyne Gould Corporation, has agreed to sell its 18.3% stake, which at 60c per share is valued at $83.4 million.
In a statement to the stock exchange yesterday, Agria's management said it had no intention to increase its shareholding above 50.01%, if the offer was successful.
"Agria has committed itself in the draft takeover offer document not to make a further takeover offer at a higher price for a period of 12 months," the statement said.
Craigs Investment Partners broker Chris Timms said that while committing to not increase its stake with another offer, the joint bidders could increase their holdings by "creeping" up to a maximum 5% per year buying shares on the open market, which did not require takeover notification.
Forsyth Barr broker Suzanne Kinnaird said the joint bidders were "essentially saying they are not ruling out the possibility of increasing their holding in PGW, further down the track".
Mr Timms said that while the 60c per share offer carried "reasonable premium", given they were trading around 48c, it was not a "compelling" price for shareholders to sell.
After a mid-December profit downgrade announced by PGGW, Craigs had downgraded its year-ahead valuation from 71c, but at 65c per share its forecast valuation was better than the offer.
He noted that given Agria wanted only 50.01%, there could be an oversubscription, meaning a scaling back for each applicant.
In mid-December, PGGW announced a cut to its earnings forecast after difficult first-half trading conditions.
It downgraded its forecast full-year earnings before interest, tax, depreciation and amortisation (ebitda), and after adjusting for the management contract with New Zealand Farming Systems Uruguay, to between $58 million and $61 million, compared to ebitda of $70.5 million for the 2009-10 year.
It then revised its forecast after-tax profit from $23.3 million in 2009-10 to a range between $15 million and $18 million.
