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Chinese group buys 13% of NZ farming supplier

(Agencies)
Updated: 2009-10-16 09:29

WELLINGTON, New Zealand: China's seed and agriculture researcher Agria Corp. is to buy a 13 percent stake in New Zealand's largest rural services business, PGG Wrightson, with the aim of becoming a cornerstone shareholder, the companies said Friday.

The two companies signed an agreement for Agria to invest NZ$36 million (US$27 million) in PGG Wrightson through a share placement and to form a strategic partnership.

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Agria's investment was conditional on it being satisfied that sufficient funds would be raised through equity raising and other sources for PGG Wrightson to repay a $149 million debt facility by March 31.

A China-based agricultural solutions provider listed on the New York Stock Exchange, Agria is engaged in research and development, production and sale of upstream agricultural products.

The companies said the partnership would cooperate on development and international commercialization of seed cultivars, development of livestock demand in China, exports of livestock from New Zealand, Australia, South America and other markets, and on establishing livestock trading systems in China using PGG Wrightson's auction expertise.

"Both parties' aspiration is (for Agria) to become a significant shareholder in PGG Wrightson over time," they said in a statement.

PGG Wrightson chairman Keith Smith said the cooperation agreement "will provide a framework in which intellectual property, management know-how and financial resources can be deployed jointly and for mutual benefit."

"PGG Wrightson has for some time been looking to establish a strategy and business platform for entry into China. This agreement and the relationship with Agria will enable that aspiration to be met," he said.

Agria chairman Alan Lai said China never had a lack of growth opportunities and market potential but "success requires hands on operational expertise that this partnership brings."

"The quality of international operational expertise to which Agria will gain access is not available in agricultural services in China, and will ... strengthen Agria's capabilities in the implementation of its strategic direction," he added.

PGG Wrightson, with annual turnover of $968 million, was formed in 2005 from the merger of long-established Pyne Gould Guinness and Wrightson. It also operates in Australia and South America. Its shares jumped 15c to NZ$0.8000 (US$0.5960) following the Agria announcement.

In its latest financial results, Agria reported total revenues of US$47 million for the nine months ended September 30. Its share price closed 3c higher at US$2.19 in the latest NYSE session.