By Gareth Vaughan
The Shareholders' Association says it will probably vote against PGG Wrightson's plan to sell its finance company to Heartland New Zealand in what it labels "another related party transaction."
John Hawkins, Shareholders' Association chairman, says there was some merit in moving rural lender PGG Wrightson Finance to Heartland, created through the merger of Marac Finance, CBS Canterbury and the Southern Cross Building Society, but the proposed deal wasn't the best way to achieve it.
"This is another related party transaction of the type which has almost knee-capped our leading rural servicing business over the past five years at a time when NZ agriculture is enjoying record returns," said Hawkins.
The deal would see PGG Wrightson lending up to NZ$100 million of the up to NZ$110 million received for selling its finance company subsidiary to Heartland NZ to a newly established subsidiary that will buy the dud loans bank wannabe Heartland NZ doesn't want to inherit, and will use another NZ$10 million to subscribe for shares in the capital raising Heartland NZ plans to use to help fund the deal.
The deal also sees ASB wind up a risk sharing arrangement with PGG Wrightson Finance, which is buying loans in this back from ASB at book value. This is likely to amount to tens of millions of dollars, which PGG Wrightson will fund through a loan from Heartland NZ. See more on the proposed deal here.
PGG Wrightson will hold a special meeting tomorrow, June 28, for shareholders to vote on the deal.
Hawkins said he couldn't understand why a modestly profitable asset with a large pool of performing loans, market dominance and significant funding lines, failed to warrant any goodwill at all. PGG Wrightson says a sale at asset value only is the best deal it can get.
That seemed "extraordinarily pessimistic" when PGG Wrightson would transfer a loan book stripped of doubtful liabilities with 18 "really suspect" loans totalling NZ$90 million remaining with PGG Wrightson, which will also guarantee a further eight loans worth NZ$30 million.
"There seems to be a pretty significant transfer of assets while retaining most of the risk," Hawkins said.
PGG Wrightson shareholders ought to consider the implications for their own company very carefully before deciding whether or not to approve the deal, Hawkins added.
"The Shareholders' Association was likely to vote its proxies against the plan, and hoped to send the directors back to come up with a more realistic offer for PGG Wrightson shareholders to consider.
(Update adds date of special shareholder meeting).
5 Comments
The news coming out in respect of this transaction is all over the place. This in itself is a concern and shareholders have reason to be annoyed. Their rights appear to have been ignored. Heartland clearly have some large related party transctions buried in PGW. So much for tranparency
Expanding on this however, the amalgamation to form Heartland Bank is again not particularly transparent. From my analysis the CU were losing money hand over fist, therefore the only benefit to Marac was to acquire depositiors. Perhaps I am missing something here?
Do they not realise that when the guarantee expires PWF will be in serious trouble? Heartland should wait and swoop in once PWF starts defaulting.
You have nailed it though - CBS and SCBS traded their less risky funding model for Marac's high profits. Seems like a good trade to me for all parties. Not sure if there is much more for you to miss. New funding model is alot more diverse and offers lower cost of funds.
Cavalier Carpets ! ...... to name just one NZ company that has always acted in it's shareholders' best interests . The board has operated the company prudently , they have expanded at a sustainable pace , and have regularly rewarded shareholders with increased dividend payments .
PGG Wrightson shareholders have rubber stamped the deal, Alan Wood at The Press reports - http://www.stuff.co.nz/business/industries/5201979/PGGW-Finance-deal-ge…
And here's PGG Wrightson's statement:
Special Shareholders Meeting Results
Special Shareholders Meeting Results
PGG Wrightson Limited held a Special Shareholders Meeting in Christchurch this morning. Shareholders were asked to vote on two resolutions. The results of the resolutions put to the meeting are as follows:
Resolution 1: As an ordinary resolution that the acquisition by Ngai Tahu Capital Limited of 7.24% of the shares in Agria Asia Investments Limited, as described in Part One of the Explanatory Memorandum accompanying the Notice of Meeting be approved.
The resolution was approved by shareholders with the following votes cast:
For: 175,523,446 (99.55%)
Against: 787,197
Abstain: 379,403,911
Resolution 2: As an ordinary resolution that for the purposes of NZX Listing Rule 9.2.1, that the sale by PGG Wrightson Limited of 100% of the shares in PGG Wrightson Finance Limited to Heartland Building Society, including:
i. the execution of the Transaction Documents;
ii. the subscription by PGG Wrightson Limited for ordinary shares to be issued by Heartland New Zealand Limited, for an aggregate purchase price of $10,000,000;
iii. PGG Wrightson Limited ‘s granting of a guarantee in favour of Heartland Building Society in respect of certain loans provided by PGG Wrightson Finance Limited to its customers;
iv. the potential sale of up to $50,000,000 of loans by PGG Wrightson Finance Limited to Heartland New Zealand Limited, or its nominee; and
v. the execution by PGG Wrightson Limited of the Distribution and Services Agreement with Heartland Building Society, and the performance by PGG Wrightson Limited of its obligations under the Distribution and Services Agreement with Heartland Building Society;
each as described in Part Two of the Explanatory Memorandum accompanying the Notice of Meeting.
The resolution was approved by shareholders with the following votes cast:
For: 480,604,947 (99.48%)
Against: 2,528,058
Abstain: 72,581,549
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