NBR: Analysts fear PGG Wrightson deal is dead

Speculation is rife in the share markets that Craig Norgate’s PGG Wrightson and Silver Fern Farms partnership deal is a dead duck, killed by turmoil on world credit markets.
“It is hard to see how it can be resurrected,” one share market analyst said.

It seems the market has sighed with relief that PGG Wrightson may not be paying $220 million for 50% of Silver Fern, the country’s largest meat company, and thus adding to its already considerable debt.

That is because PGG Wrightson’s share price has risen 23c or 14% this morning, after plunging more than $1 in recent weeks since farmers narrowly voted yes to the deal on September 8.
Contributing to the plunge was Mr Norgate’s plan to sell some of Rural Portfolio Investment’s shares in NZ Farming Systems Uruguay to raise money for the Silver Fern deal.

The analyst was “reading between the lines” of last night’s surprise announcement that settlement has been deferred and that funding arrangements will be revisited.

“Completion of the proposal in its current form at the current time is not possible,” PGG Wrightson said.

“The delay is likely to be counted in weeks rather than days, but the failure of the administration’s bailout proposal to be approved by the House of Representatives and the resulting nosedive on Wall Street could not have come at a worse time.”

Mr Norgate said that the announcement was extremely disappointing for all those who worked so diligently on bringing it to fruition as well as to those Silver Fern Farms shareholders who supported it so well.

The analyst said such a proposed lengthy delay effectively meant going round the whole capital and finance raising trail again to get $220 million, in much less advantageous conditions.

“Therefore I would be surprised if it happens in the very risk-adverse climate,” he said.

A recent capital raising secured $78 million from related parties and institutions. This was to be followed by a $32 million underwritten retail offer.

However, the institutions that took part in the equity placement are understood to have been furious at a “money-go-round” deal that would have seen PGG Wrightson buy 14 million NZ Farming Systems shares from Mr Norgate’s Rural Portfolio Investments and PGG Wrightson director Murray Flett.

The proceeds were then to be given back to PGG Wrightson, to pay for Mr Flett and Rural Portfolio Investments’ part in its capital raising. The arrangement was announced on Friday and axed on Monday.