Auckland, New Zealand and Beijing, China
October 15, 2009
PGG Wrightson (NZX: PGW) and Agria Corporation (NYSE: GRO) ("Agria") today announced their signing of an agreement that provides for Agria to make an investment in PGG Wrightson (the "Subscription Agreement") and for the formation of a strategic partnership between PGG Wrightson and Agria (the "Co-operation Agreement").
PGG Wrightson is New Zealand's largest rural services business, offering a wide range of products, services and solutions to farmers, growers and processors in New Zealand and internationally.
Agria (NYSE: GRO) is a China-based agricultural solutions provider listed on the New York Stock Exchange and engaged in research and development, production and sale of upstream agricultural products.
Co-operation Agreement
PGG Wrightson and Agria have entered into a strategic partnership and have jointly undertaken to work to create value for both companies through the advancement of agricultural technology and the development of new markets. The scope of co-operation includes:
- Joint development and international commercialisation of seed cultivars to which Agria, PGG Wrightson and their development partners have access
- Development of livestock demand in China and export of livestock to meet that demand, from New Zealand, Australia, South America and other markets; and the establishment of livestock trading systems in China using PGG Wrightson's technical expertise, particularly through the establishment of an auction system.
- Jointly examine the development of a rural services business in China, where there is currently no mature provider of rural services.
- Examine additional funding lines for growth through third party sources for PGG Wrightson Finance
Subscription Agreement
Preliminary agreement has been reached for Agria to invest in PGG Wrightson through the placement of new equity representing 13 percent of PGG Wrightson's share capital, at 88 cents per share, at a value of NZ$36 million. Both parties' aspiration is to become a significant shareholder in PGG Wrightson over time.
The PGG Wrightson Board is considering options for an equity raising such as a rights issue. While the timetable cannot be certain at this point, it is believed that an announcement on the terms of any equity raising could be made by early November.
The investment by Agria in PGG Wrightson under the Subscription Agreement is conditional on:
- Approval having been received from New Zealand's Overseas Investment Office
- PGG Wrightson entering into an underwriting agreement in relation to any proposed equity raising
- PGG Wrightson not entering into any other material transaction prior to completion of the equity raising without Agria's approval (which shall not be unreasonably withheld)
- PGG Wrightson not undertaking any intervening equity issue or distribution (or equivalent)
- Agria being satisfied (acting reasonably) that sufficient funds will be raised from any proposed equity raising and other sources to enable PGG Wrightson to fully repay the NZ$200 million Amortising Debt Facility by 31 March 2010
Comments
The chairman of PGG Wrightson, Mr Keith Smith, said the arrangements being progressed with Agria had the potential to create significant long-term value for both companies.
"The Co-operation Agreement identifies a range of opportunities for PGG Wrightson and Agria to work together to create value. It will provide a framework in which intellectual property, management know-how and financial resources can be deployed jointly and for mutual benefit, according to specific opportunities and requirements.
"This programme will be very consistent with the existing business platform of PGG Wrightson. Our primary focus will remain on our customers in New Zealand, Australia and South America -- and on improving performance in our existing businesses and markets while exploring new opportunities under the Co-operation Agreement. Agria is investing on the same basis.
"PGG Wrightson has for some time been looking to establish a strategy and business platform for entry into China. This agreement and the relationship with Agria will enable that aspiration to be met. PGG Wrightson, along with others in agribusiness, has been evaluating for some time the scale and types of opportunities available through China's emergence as a global agricultural force.
"We have now identified a partner whose business profile and intentions are truly compatible with our own. From PGG Wrightson's perspective, the partnership embodied in the Co-operation Agreement will enable entry into specific markets and facilitate growth alongside a partner with a unique market footprint and strategic relationships.
"We also look forward to welcoming Agria as a new cornerstone shareholder. This is entirely consistent with the programme to be undertaken through the Co-operation Agreement, and will clearly assist PGG Wrightson in meeting its financial objectives."
Mr. Alan Lai, Agria Corporation's Chairman, commented: "We are excited to be working with PGG Wrightson. The strategic co-operation agreement gives Agria the opportunity to work alongside a high-quality management team with world-leading experience in the agriculture sector. The areas of co-operation have been carefully chosen as those where combining the technical, commercial and operational experience of the two businesses gives greatest opportunity for commercial success in China, New Zealand and internationally.
"China never has a lack of growth opportunities and market potential but success requires hands on operational expertise that this partnership brings.
"The quality of international operational expertise to which Agria will gain access is not available in agricultural services in China, and will serve to strengthen Agria's capabilities in the implementation of its strategic direction.
"China is a world leader in many areas of agriculture, including cultivation of rice, cotton and to a certain extent corn, and Agria has secured access to world class research through relationships with leading research institutes including China National Academy of Agricultural Sciences. I believe by partnering with PGG Wrightson we can best accelerate the commercialisation of these opportunities.
"Co-operation between China and New Zealand is highly logical given the importance of the agriculture sector to both countries. This view is supported by the free-trade agreement that China has entered into with New Zealand, which is China's first and currently only free trade agreement with a developed country."
PGG Wrightson is a publicly traded company, listed on the New Zealand Stock Exchange under the ticker "PGW", with annual turnover of NZ$1.3 billion dollars. The company is New Zealand's largest rural services business, offering a wide range of products, services and solutions to farmers, growers and processors in New Zealand, and to processors and end-users internationally. PGG Wrightson holds market leading positions in most of its businesses, which include seeds, livestock, animal nutrition, farm supplies, finance, real estate, irrigation and training: and through joint ventures in wool and insurance. PGG Wrightson draws on the knowledge and expertise of 2,700 staff -- and the services of diverse business units, alliances and partnerships -- to meet the needs of more than 90,000 clients across New Zealand. The company has growing operations in Australia and South America. It was formed in October 2005 through the merger of Pyne Gould Guinness and Wrightson. PGG and Wrightson dated from 1851 and 1841 respectively.
New York Stock Exchange listed Agria Corporation, ticker "GRO", is an innovative China-based agri-solutions provider focusing on research and development, production and distribution of three different types of upstream agricultural products. Its diversified portfolio of products comprises corn seeds, sheep breeding and seedlings, including proprietary products. Agria processes and packages corn seed products and sells them to local and regional distributors. It produces and sells sheep breeding products (frozen semen, embryos, breeder sheep and Primalights III hybrid sheep) primarily to government-operated breed improvement and reproductive stations, breeding companies and other sheep reproductive stations and farms. The Company also produces and sells blackberry, raspberry and date seedlings to end users such as municipal agencies and seedling companies; and white bark pine seedlings for urban greenery. Agria has a strong research and development base and extensive relationships throughout China's agricultural sector, including preferential access to one of the largest seedbanks in the world through a joint venture with the China National Academy of Agricultural Sciences (CNAAS). CNAAS is one of the most important research groups in China, owning 39 research institutes covering all major areas in the agricultural sector. CNAAS has chosen Agria to commercialise its research and technology through a majority equity investment in Zhongnon (China Agricultural Seed Company) and a strategic co-operation agreement between CNAAS and Agria.
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