MARTA STEEMAN

The sale of PGG Wrightson Finance has been under consideration for some time its parent revealed in the target company statement.

PGG Wrightson has not stated before that it has been considering selling its finance company.

The target company statement said: “PGG Wrightson is currently undertaking a strategy to review the divestment of PGG Wrightson Finance Limited’s finance book. However, this initiative has been under consideration for some time, and is unconnected to the offer (by Agria Corporation and New Hope).”

In late December Agria Corporation said in its takeover notice it supported the divestment of PGW Finance, although PGW had not indicated it was up for sale before that.

The partial takeover bid at 60c a share by Agria has gained the agreement of PGW’s 18.3 per cent shareholder, Pyne Gould Corporation, which has agreed to sell its PGW stake to Agria.

PGC is interested in PGW Finance becoming a part of a new $2.2 billion financial services group recently formed from the merger of PGC’s former subsidiary Marac Finance and two buildings societies. That new company is Building Society Holdings, which listed on the NZX last week.

Meanwhile, in its appraisal of the Chinese bid for PGW, appraisers Grant Samuel say “The net proceeds from a sale of PGW Finance will almost certainly be used to reduce debt in PGW.”

PGW’s banking facilities were very restrictive and it would look to repay debt and to negotiate new facilities on better terms, the report said.

Grant Samuel did not value PGW Finance separately from PGW.

PGW Finance has $100m in equity, according to its half-year results posted yesterday.

The finance company which lends to the agricultural sector has 71 per cent of its loans in the South Island.

Yesterday the finance company posted a 59 per cent fall in profit to $1.33 million for the half-year. The fall was due to higher loan impairments and higher costs.

PGW Finance has been changing the structure of its lending toward the shorter term and has stopped making longer-term loans.

Chief executive Mark Darrow said yesterday the change in lending strategy to shorter loans and more seasonal finance gave better returns on equity and was in line with the finance company supporting the transactions of the parent.

Seasonal funding is 28 per cent of PGW Finance’s lending and term loans 72 per cent.

PGW Finance’s revenue fell 0.3 per cent to $28.5 million for the six months to December 31 2010.

– BusinessDay.co.nz

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