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Referendum On The Future Of Wrightson

News Release

Referendum On The Future Of Wrightson

The Wrightson board has left shareholders with a stark choice in rejecting the partial takeover offer from Rural Portfolio Investments – support a committed shareholder with its own capital tied up in the company and a track record of success, or vote for ‘no change’ to a regime that has continued to make headlines for all the wrong reasons in recent times.

The Managing Director of RPI, Craig Norgate, said today he was “extremely disappointed” at the approach taken by the Wrightson board. “In rejecting the offer it has relied upon a valuation based on more hollow promises and inflated multiples.”

Norgate said the Wrightson board was asking shareholders to believe that there had been a fundamental change in the company’s value since the most recent trading results were announced on 24 February.

“The half-year results announcement highlighted the impact of the currency and global commodity prices as key factors in a 33% percent decline in operating earnings. The performance is even worse when the poor quality of the half-year earnings is taken into account – the result was bolstered by the one-off impact of a $1.3 million accounting writeback of previous property provisions.

“Unfortunately the forecast earnings released today paint a picture of more of the same – a profit (approximately 30%) down on last year. It is also disappointing to see that the normal dividend is falling to 8.5c per share and the company is having to pay a special dividend of 3c to maintain cash flow to shareholders – particularly when the Chairman assured the market in February that the company would not use the balance sheet to support dividends.

“Even at the bottom end of the board’s range ($1.72) the valuation released today is 30 percent higher than the $1.32 market price for the company’s shares immediately before RPI began buying shares in the company in September 2003, and a massive 42 percent higher than the $1.21 share price immediately after the results announcement in February. It is thus very clear that the board’s view of the company’s value is not shared by investors.

“The company has never traded above $1.60 since being listed, and it is probable that the only reason it has even held the $1.20 level in recent times is our presence in the market.”

Norgate said RPI was committed long-term to turning the fortunes of Wrightson around. “We recognise that it will take time to revitalise the company, and we are prepared to commit that time to back our investment.”

Norgate described as “facile” the Wrightson board’s criticism of some details of the offer.

“The issue of scaling raised by the board is a feature of the takeovers legislation designed to protect the interests of shareholders. It is there to ensure that shareholders get an equal opportunity to participate in the offer – an important principle that we fully endorse. Given the attractive price we have offered, that seems especially appropriate.

“In this particular situation the benefits of scaling are very apparent. Not only is there equality of opportunity, but given that the largest shareholder, Fonterra, has indicated it will not accept, shareholders who do so can be confident that they will achieve an exit for a high proportion of their holdings.”

Norgate said he had hoped the board would take a more realistic approach to its response to the offer, and was disappointed with today’s recommendation. “We urge shareholders to consider the future of the company carefully in making their decision.

“Shareholders need only to ask themselves where the share price will go without RPI’s involvement.”


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