6 Aug 2018

PGG Wrightson to sell seeds business

3:48 pm on 6 August 2018

Rural services firm PGG Wrightson is to sell its seeds business to a Denmark-based company, and may reward shareholders with a cash payout.

A young plant

File photo. Photo: 123RF

It said it would sell the operation to DLF Seeds for $421 million. The buyer will also cover the seed division's $18m debt.

The sale follows PGG Wrightson's (PGW) review of its business and structure, which has been under way all year.

PGW's deputy chairman Trevor Burt said the company had received various offers for the seeds business.

"The DLF Seeds offer was particularly compelling in terms of the value it would deliver to PGW shareholders."

The price is significantly above the division's book value and Mr Burt said once the sale and broader review were completed PGW might have as much as $292m surplus cash, which could be paid out to shareholders.

"Pending completion of the sale of the PGW Seeds business, the board will evaluate the full range of options available including debt reduction, distributions to shareholders and strategic growth opportunities available to PGW," Mr Burt said.

The sale agreement also included provisions for PGW to continue a close commercial relationship with the seeds business.

The seeds and grain business operates in New Zealand, Australia and Uruguay, providing crop and pasture seeds.

The sale is conditional on getting approval from shareholders, competition regulators in New Zealand and Australia, and the company's lenders.

Last month PGG Wrightson warned that its operating earnings would be higher than last year but its bottom-line profit would be hit by a range of one-off items including historic holiday pay miscalculation, higher depreciation costs on its technology, and higher interest costs.