“This is a really good offer, a really good price.
“It’s also a good, clean deal and that is the key thing we were after,” he said.
Denmark-based DLF will pay off the unit’s $18m of debt.
The price compares with Wrightson’s market capitalisation of $483m on the NZX before the sale was announced.
The sale process was pretty well contested, Burt said.
“We were prudent with the book value so there’s no trouble there. They value the company and the opportunity it gives them.”
The sale,which will see PGW selling its interests in South America and Australia, is subject to several conditions, notably Overseas Investment Office (OIO) approval.
That process alone can take many months and the PGW seeds business owns sensitive farmland under the relevant legislation. PGW is majority-owned by Chinese group Agria with just over 50% of the shares so the sale involves a transfer from one overseas entity to another.
Burt said that does not point to an easy path for the application and the OIO works on a case-by-case basis. In a research report, sharebrokers Forsyth Barr suggested the move from one offshore owner to another might not be a major obstacle. The transaction at a premium valuation is favourable for PGW shareholders.
The shares rose to 69c from 64c after the deal was reported to the NZX.
Burt expects PGW shareholders to vote on the sale proposal around the time of the annual meeting in October and is confident of support there. All going well, the deal could be settled in December.
Shareholders are in line for a significant cash return if the deal proceeds.
Subject to the outcomes of the continuing strategic review on the group’s future, directors said there is potential for a non-taxable distribution of up to $292m to shareholders. That would be about 39c a share.
The payout is not a commitment but is a logical outcome, Burt said.
Agria, which took control of PGW in 2010-2011 when no other major investor was interested, would receive just over $146m.
Ngai Tahu Capital, represented by Burt on the PGW board, has an interest in some of the Agria shares.
All options are open for the remaining businesses in the group and he isn’t prejudging the outcome. If they are kept, they will make up a large-scale business with market-leading retail and livestock/wool agency activities.
“What would be left would be a good company with good prospects and good money behind it. Farmers wouldn’t have anything to worry about.”
PGW and DLF have also agreed a sole-distribution agreement giving PGW access to seed products to supply to clients.
“It would be business as usual,” Burt said.
PGW seeds is the biggest subsidiary of PGW by assets and earnings, with June 2017 annual operating earnings (Ebitda) of $37.4m on $312.6m of sales, for an operating margin of nearly 12%.
The total price being paid (including the debt repayment) of $439m is about 12 times that Ebitda figure though the price would have been based on the June 2018 earnings due to be released next week (August 14) and forward projections. The price multiple might be slightly different.
When the deal is settled the group will have a net cash balance of about $270m after debt repayment. If the capital return to shareholders is $292m, as suggested, there will be a net interest-bearing debt of about $20m based on June 2018 pro-forma accounts.
Accountancy group Korda Mentha will prepare an independent report for shareholders ahead of their vote.
Approval is also required from the Commerce Commission, regulatory authorities in Australia and South America, PGW seeds joint venture partners and its bankers.
DLF chief executive Truels Damsgaard said the deal is an important transaction for his group, which has long viewed Wrightson seeds as a strategic and complementary business to its own operations. PGW is the leading temperate forage seed developer in the southern hemisphere, a place that DLF claims in the northern hemisphere. It already has a seed development business in Canterbury.
Acquiring PGW seeds is an opportunity to provide a strong global seeds offering for customers, he said.
