The retail investor lobby says the mostly cash offer from DLF Seeds is attractive at face value, with a $292 million capital return attached. However, that short-term gain will shrink PGW to less than half its current size and leave it holding businesses inferior to the grains and seeds division.
“It seems to us that if shareholders accept DLF’s offer, they will potentially lose in the long run unless PGW can pull a rabbit out of the hat and grow the rump business,” the Shareholders’ Association said.
The investor lobby group will vote its proxies against the resolution at next week’s combined annual and special meeting. It said raising capital to fund organic growth was an obvious alternative to selling its most valuable business.
Agria Corp took control of PGW in 2011, having taken a cornerstone shareholding in 2009 to recapitalise the rural services firm in the aborted merger with Silver Fern Farms.
An independent valuation by KordaMentha found the DLF offer was fair to minority shareholders. PGW’s board, chaired by Agria’s Alan Lai, recommended investors support the transaction as the best option to emerge from the firm’s strategic review.
If shareholders opt to reject the transaction, that may prompt Agria and the board to take a broader view of the interests of all shareholders, the NZ Shareholders’ Association said.
The transaction also needs Commerce Commission and Overseas Investment Office approvals, which aren’t a given.
As well as the risk the transaction could leave PGW “a shadow of its former self” NZSA chief executive Michael Midgley said there may also be concern as to whether the sale would be in the broader strategic interest of New Zealand.
Similar arguments were mounted when Agria mounted its partial takeover in 2011, however, no local investors were willing to match that price. While the latest review of the Overseas Investment Act will likely allow ministerial discretion to reject transactions based on national interests, no specific power currently exists.
The NZ Shareholders’ Association will also vote against re-appointing Agria’s Kean Seng U, saying he’s acted in Agria’s interests rather than those of PGW. It will support independent director Ronald Seah’s appointment.
PGW shares were unchanged at 60 cents.
BusinessDesk
