Wrightson gets OIO approval to sell seeds unit, still mulling size of return
By Paul McBeth
April 18 (BusinessDesk) - PGG Wrightson has cleared the final hurdle to sell its seeds division to DLF Seeds for $434 million after securing Overseas Investment Office approval, but still hasn't figured out how much to return to shareholders.
Now the OIO has signed off on the transaction, the rural services company anticipates the deal to settle either this month or May. The Danish cooperative will pay $413 million for the Wrightson unit and take on $21 million of net debt, leaving the New Zealand firm with a cash surplus of about $210 million. Excluding the seeds unit, Wrightson was sitting on cash and equivalents of $3.9 million as at Dec. 31.
The sale will generate a capital gain of more than $120 million for Wrightson in its annual profit result, but the board hasn't decided how to return funds to shareholders.
"The options for a capital return to shareholders being contemplated by the board would allow PGW to reset its debt position and right-size its corporate operations for the business going forward.” deputy chair Trevor Burt said in a statement.
Wrightson had previously signalled it could return up to $292 million to shareholders on the completion of the deal, either through a buy-back or a share cancellation.
That decision will be made by a rejigged board, with three new directors - David Cushing, Rodger Finlay and Sarah Brown - officially taking their seats on April 30. Burt, and independent directors Bruce Irvine and John Nichol, will leave the same day. Finlay will take over the chair.
The Cushing family's H&G investment vehicle increased its stake to about 2.7 percent earlier this month, buying shares from cornerstone investor Agria Corp.
The proposal won almost 97 percent support at a special meeting in October. The New Zealand Shareholders' Association opposed the transaction, saying the short-term gain for investors was offset by the remaining Wrightson operation being half the size and inferior to the seeds unit.
Once the deal is done, Wrighton's slimmed-down business will consist of stock agency, retail and water rural services based entirely in New Zealand.
Chief executive Ian Glasson said the transaction is an excellent outcome and includes an ongoing relationship between the rural services unit and the seeds business.
"Our immediate focus will now move to completing settlement and ensuring a smooth transition to the separate business structures," he said.
Wrightson shares last traded at 52 cents and have increased 2 percent so far this year.