Wrightson settles Silver Fern dispute for $42M

PGG Wrightson has settled its dispute over a failed alliance with Silver Fern Farms for cash and shares amounting to about $42 million.

The agreement ends protracted discussions on compensation between New Zealand's largest rural services company and Silver Fern after Wrightson was unable to settle on its unconditional $220 million agreement to buy a half stake in the South Island-based meat processor.

Under terms of the settlement released today, Wrightson made a $25 million payment today in addition to $5 million already paid. It will issue 10 million ordinary shares, worth $12 million at Friday's price of $1.20 per Wrightson share.

As well as the mix of cash and stock, Wrightson and Silver Ferns will revive their efforts to form an alliance, integrating supply chain functions as envisaged in the original deal. To conclude the settlement, Wrightson obtained what is effectively a $25 million loan from South Canterbury Finance, with the finance company holding the right to convert the debt to shares.

"The resolution allows both companies to focus on optimising outcomes in a challenging economic environment, rather than wasting resources on protracted litigation," said Silver Fern chairman Eoin Garden, who had supported the original proposal.  "This is a sensible and pragmatic 'NZ Inc' outcome," he said in a statement.

Silver Fern Farms intends to remain a long-term shareholder of Wrightson, he said. Wrightson chairman Craig Norgate said the settlement provides certainty over the financial exposure resulting from our inability to complete the transaction approved last year.

"The settlement was approved by Wrightson's banking syndicate and is well within the company's capacity to manage financially."

South Canterbury Finance provided a facility of up to $25 million of subordinated debt with the right to convert all or part of the amount to Wrightson ordinary shares within 90 days at a strike price of $1.50 a share.

"These are two iconic agri-business companies whose importance to the New Zealand economy cannot be under-estimated," South Canterbury chairman Allan Hubbard said.

"Their size and industry focus demand that they be supported because their businesses are essential to the New Zealand community."

Businesswire.co.nz

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