Wrightson bid for Genesis gains momentum

By NZPA

Wednesday 5th March 2003

A play by rural company Wrightson for a major chunk of biotechnology firm Genesis appeared to be paying off this morning.

By 12pm Wrightson had gained 14.8 percent of the 19.9 percent it was seeking. Wrightson, which already has research links with Genesis, has said it is not seeking any more of the company.

On the surface it appeared investors liked the offer of $1.31 per share, sending its shares up to that level from yesterday's closing price of 97c.

But in fact, most of the shares appeared to be from institutions. Most retail sellers would be taking a loss if they sold now, said ASB Securities private equities broker Stephen Wright.

"Don't forget they were $2 about four months ago," he said of Genesis' share price.

The company had cash reserves worth about $1.70-$1.80 a share "so they're still well below their net asset backing, plus they get grants from government organisations and joint ventures, they have got cash flows, and they have made progress on several fronts which of course can't be quantified or valued."

Mr Wright noted that one seller could have been the person who bought a million shares at $1.10 in February.

Wrightson's move is seen as a widening of its access to different types of research, as it gets more involved in the bigger picture of livestock development and greenhouse gas research.

"Wrightson has consistently advocated the need for more collaboration among the many parties involved in agricultural biotechnology and we hope that our investment in Genesis will provide an impetus for other collaborative initiatives," chief executive Allan Freeth said.

Wrightson, which is best known for its rural retail chain and farm finance, is also involved in seed and grass technology, and has had a three-year partnership with Genesis in forage research.

Wrightson's biggest stakeholder is RD1, a retail offshoot of dairy giant Fonterra, which is working on dairy cattle and clover genetics.

And in December, Wrightson joined the Pastoral Greenhouse Gas Research Consortium, a combined industry and government initiative researching ways of reducing methane production from cattle, sheep and deer.

If a pasture can be developed to reduce methane, it could not only lower greenhouse gases but result in animals with more energy to convert into milk or meat.

Genesis chief executive Jim Watson said the move would probably strengthen his company's interest in pasture research. "Most of the livestock industry believes gains in productivity are more likely to come through better nutrition in the grasses than actually through continued genetic improvement in the animal itself."

In addition to grasses, Genesis is also involved in several human health treatments and in forest research. It was already interested in ways in which plants could be used to capture carbon emissions, Dr Watson said.

As far as the offer was concerned, he said Wrightson had been a good collaborator in the past and seemed to see Genesis' low share price as a good chance to invest in biotechnology.

"The whole biotech industry globally is in a slump and there are in Australia, the United States and Europe... many companies which are trading at a share value which is not reflected in their cash value."

Shares in Genesis have fallen sharply from $5.10 a couple of years ago to an alltime low of 90c last week, reflecting the competition and lengthy time that Genesis faces in getting some of its products to market.

Genesis made a loss of $10.7 million in the year to December . A month ago the company insisted it was not a takeover target.

"We think it's a pretty low risk because there's quite a percentage held by staff directly in shares and through the share option scheme," said Stephen Hall, Genesis' head of corporate services.

"They wouldn't want the company to be broken up unless there was a very high price being paid for it."

Wrightson said the Genesis investment would have no impact on the dividends payable by the company.

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