PGW Seeds sale to DLF gains OIO approval

Clearance for the sale of PGG Wrightson's seed and grain business has approval from two of three...
PGG Wrightson's sale of seeds to a Danish co-operative has been given approval by the New Zealand Overseas Investment Office. PHOTO: GETTY IMAGES
The sale of PGG Wrightson Seeds to Danish-owned co-operative DLF Seeds has passed the final hurdle by gaining New Zealand Overseas Investment Office approval.

In a statement, PGG Wrightson deputy chairman Trevor Burt said it was pleasing the transaction could now move forward to settlement, which was expected to occur at the end of this month or next.

It was previously announced the agreed headline price for the seed and grain business was $434million, which including net debt of $21million, would result in a sale price of $413million.

After the sale proceeds were received on settlement and debt repaid, PGW would expect to have a cash surplus of around $210million, subject to transaction completion timing, working capital requirements and other transaction wash-up items, Mr Burt said.

"Following settlement of the seed and grain transaction, we would expect to report a capital gain on sale in excess of $120million, which will flow through to net profit after tax.

"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," Mr Burt said.

Earlier this year, PGG Wrightson reported a plunge in profit after its seed and grain division delivered an $8.6million loss, paring overall first-half profit to $320,000.

PGW chief executive Ian Glasson described the sale as an "excellent outcome" for PGW, its people and its customers as the agreement provided for an ongoing close working relationship between PGW Rural Services and PGW Seeds.

The company's immediate focus would now move tocompleting settlement and ensuring a smooth transition to the separate business structures, he said.

The sale, which arose from a strategic review conducted by PGW, was not without controversy. In October last year, New Zealand Shareholders Association chief executive Michael Midgley said PGW would be left "a shadow of its former self" if shareholders approved the sale of the seeds business, and there might also be concern as to whether the sale would be in the broader strategic interest of New Zealand.

It would leave PGW less than half its present size and with a range of businesses widely considered to be inferior to the grain and seed division, he said at the time.

DLF Seeds was established in 1872. It is owned by DLF AmbA, a co-operative owned by about 3000 Danish seed growers.

Its operations are in the area of forage and turf seed, sugar and fodder beet seed, seed potatoes and multiplication of vegetable seed, and is active in more than 80 countries.

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