PGGW takeover party withdraws

Shareholders look likely to miss out on a financial windfall now there is little chance of a bidding war for rural servicing company PGG Wrightson.

PGG Wrightson yesterday announced an unnamed party that was doing due diligence ahead of a possible takeover bid had withdrawn from the process, leaving China-based Agria largely free to increase its shareholding in the company from about 19% to 50.01% at an offer price of 60c a share.

Macquarie Equities Research had said, without that bidding tension, PGG Wrightson's share price could fall, which it did almost immediately.

The share price fell 4c, or more than 7%, during trading yesterday, to close at 53c.

The identity of the party investigating a possible takeover offer has been kept a secret, but it is widely understood to have been Canadian-owned Australian company Landmark Rural Holdings.

Yesterday, PGG Wrightson (PGGW) advised, for "strategic reasons specific to themselves, they do not intend to proceed and make a formal takeover offer for PGGW at this time".

The takeover-response committee of independent directors has accepted an independent assessment recommendation shareholders accept a partial takeover offer by Agria, and that advice was reinforced yesterday.

"That recommendation has not changed," the committee said.

Without a competing bid, Agria was now under no obligation to lift its bid from 60c and, given it was only after a small portion of shares on the open market, it was unlikely its offer would increase.

Pyne Gould Corporation has already agreed to sell its 18.3% holding in PGGW to Agria.

Macquarie's assessment of the Agria bid was that shareholders faced being minority stakeholders and losing a significant amount of liquidity, as they will only be able to sell a portion of their stock.

This will lead to an overhang of shares, given Pyne Gould Corporation's agreement to sell its stake.

Macquarie said yesterday's news strengthened its view that Agria's bid did not provide value to PGGW shareholders, and that they should use share-price strength to lower their holding.

PGGW's takeover-response committee said that while Agria's bid had merit for shareholders with "near-term focus or who value near-term certainty", those with longer-term investment views may conclude the offer undervalued the company's longer-term prospects.

Agria is leading the bid, with China's New Hope Group investing about 10% of the purchase price, but Grant Samuel, who wrote an independent assessment of its bid, was critical about the lack of clarity in their intentions for the company, especially given many shareholders were likely to retain some shares after scaling back.

There is speculation, for example, the new majority shareholders could quit PGG Wrightson Finance and, given Agria has a large seeds business in China, there is some uncertainty about what that means for PGGW's large and influential seeds business.

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