OIO cuts deal with Wrightson shareholder Agria over 'good character' test

Thursday 20th December 2018

The Overseas Investment Office has cut a deal with PGG Wrightson cornerstone shareholder Agria over the Singaporean firm's good character, agreeing to let it cede control of the rural services firm and face a court-imposed fine.

The office, a unit of Land Information New Zealand, started investigating whether Agria still met the 'good character' test required of foreign investors when the US Securities and Exchange Commission began looking at the firm in 2015 after it was delisted from the New York Stock Exchange. The SEC subsequently discovered the agribusiness investor's managers had inflated its share price.

Agria and its executive chair Alan Lai settled accusations of fraudulent accounting and market manipulation, paying US$3 million and US$400,000 respectively, without admitting or denying the charges.

The OIO today said it's reached a deal with Agria and former Wrightson chair Lai, requiring it to sell down its 50.2 percent stake in the New Zealand rural services firm, which it has done.

The Wrightson stake was held in a vehicle controlled by Agria, with Ngāi Tahu Capital and Chinese agribusiness New Hope International as junior partners. This week Ngāi Tahu Capital took direct ownership of 27.4 million Wrightson shares, or 3.6 percent of the company, and cancelled its shares in the joint venture vehicle, which now owns 46.6 percent of Wrightson.

The settlement also provided for penalty proceedings. They were lodged in the High Court today.

"The OIO has been in discussions with Agria and Mr Lai in light of their settlement with the United States Securities and Exchange Commission," the government agency said in a statement. "Both Agria and Mr Lai have cooperated with the OIO investigation."

Wrightson shares fell 4.1 percent, or 2 cents, to 47 cents, the lowest close in two years.

Agria first bought into Wrightson in 2009, helping bail it out after it took on too much debt in the failed merger with Silver Fern Farms. At the time, the OIO cleared the investment on the grounds that it would create or protect local jobs, boost export receipts, and also included an offer to sell riverbed and foreshore to the Crown.

It also included a research and development cooperation agreement to invest in and establish international joint ventures.

When Agria set up the joint venture with Ngāi Tahu and New Hope to take control in 2011, the OIO approved it on the grounds that it would boost exports, introduce new technology or business skills to New Zealand, and that the involvement of a key person in an industry of another nation would benefit New Zealand. The earlier investment was also a factor.

Wrightson accounts for most of Agria's business, and the firm expects to recognise a US$92 million capital gain from the New Zealand company's sale of its seeds division to Danish cooperative DLF Seeds. The Commerce Commission, whose approval is needed, has concerns about potential competition issues arising from the sale.

(BusinessDesk)

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