-- Joint development and international commercialisation of seed
cultivars to which Agria, PGG Wrightson and their development partners have
access
-- Development of livestock demand in China and export of livestock to
meet that demand, from New Zealand, Australia, South America and other
markets; and the establishment of livestock trading systems in China using
PGG Wrightson's technical expertise, particularly through the establishment
of an auction system.
-- Jointly examine the development of a rural services business in China,
where there is currently no mature provider of rural services.
-- Examine additional funding lines for growth through third party
sources for PGG Wrightson Finance
Subscription Agreement
Preliminary agreement has been reached for Agria to invest in PGG Wrightson
through the placement of new equity representing 13 percent of PGG
Wrightson's share capital, at 88 cents per share, at a value of NZ$36
million. Both parties' aspiration is to become a significant shareholder in
PGG Wrightson over time.
The PGG Wrightson Board is considering options for an equity raising such
as a rights issue. While the timetable cannot be certain at this point, it
is believed that an announcement on the terms of any equity raising could
be made by early November.
The investment by Agria in PGG Wrightson under the Subscription Agreement
is conditional on:
-- Approval having been received from New Zealand's Overseas Investment
Office
-- PGG Wrightson entering into an underwriting agreement in relation to
any proposed equity raising
-- PGG Wrightson not entering into any other material transaction prior
to completion of the equity raising without Agria's approval (which shall
not be unreasonably withheld)
-- PGG Wrightson not undertaking any intervening equity issue or
distribution (or equivalent)
-- Agria being satisfied (acting reasonably) that sufficient funds will
be raised from any proposed equity raising and other sources to enable PGG
Wrightson to fully repay the NZ$200 million Amortising Debt Facility by 31
March 2010
Comments
The chairman of PGG Wrightson, Mr Keith Smith, said the arrangements being
progressed with Agria had the potential to create significant long-term
value for both companies.
"The Co-operation Agreement identifies a range of opportunities for PGG
Wrightson and Agria to work together to create value. It will provide a
framework in which intellectual property, management know-how and financial
resources can be deployed jointly and for mutual benefit, according to
specific opportunities and requirements.
"This programme will be very consistent with the existing business platform
of PGG Wrightson. Our primary focus will remain on our customers in New
Zealand, Australia and South America -- and on improving performance in our
existing businesses and markets while exploring new opportunities under the
Co-operation Agreement. Agria is investing on the same basis.
"PGG Wrightson has for some time been looking to establish a strategy and
business platform for entry into China. This agreement and the relationship
with Agria will enable that aspiration to be met. PGG Wrightson, along with
others in agribusiness, has been evaluating for some time the scale and
types of opportunities available through China's emergence as a global
agricultural force.
"We have now identified a partner whose business profile and intentions are
truly compatible with our own. From PGG Wrightson's perspective, the
partnership embodied in the Co-operation Agreement will enable entry into
specific markets and facilitate growth alongside a partner with a unique
market footprint and strategic relationships.
"We also look forward to welcoming Agria as a new cornerstone shareholder.
This is entirely consistent with the programme to be undertaken through the
Co-operation Agreement, and will clearly assist PGG Wrightson in meeting
its financial objectives."
Mr. Alan Lai, Agria Corporation's Chairman, commented: "We are excited to
be working with PGG Wrightson. The strategic co-operation agreement gives
Agria the opportunity to work alongside a high-quality management team with
world-leading experience in the agriculture sector. The areas of
co-operation have been carefully chosen as those where combining the
technical, commercial and operational experience of the two businesses
gives greatest opportunity for commercial success in China, New Zealand and
internationally.
"China never has a lack of growth opportunities and market potential but
success requires hands on operational expertise that this partnership
brings.
"The quality of international operational expertise to which Agria will
gain access is not available in agricultural services in China, and will
serve to strengthen Agria's capabilities in the implementation of its
strategic direction.
"China is a world leader in many areas of agriculture, including
cultivation of rice, cotton and to a certain extent corn, and Agria has
secured access to world class research through relationships with leading
research institutes including China National Academy of Agricultural
Sciences. I believe by partnering with PGG Wrightson we can best accelerate
the commercialisation of these opportunities.
"Co-operation between China and New Zealand is highly logical given the
importance of the agriculture sector to both countries. This view is
supported by the free-trade agreement that China has entered into with New
Zealand, which is China's first and currently only free trade agreement
with a developed country."
Information on PGG Wrightson and Agria
PGG Wrightson (www.pggwrightson.co.nz) is a publicly traded company, listed
on the New Zealand Stock Exchange under the ticker "PGW", with annual
turnover of NZ$1.3 billion dollars. The company is New Zealand's largest
rural services business, offering a wide range of products, services and
solutions to farmers, growers and processors in New Zealand, and to
processors and end-users internationally. PGG Wrightson holds market
leading positions in most of its businesses, which include seeds,
livestock, animal nutrition, farm supplies, finance, real estate,
irrigation and training: and through joint ventures in wool and insurance.
PGG Wrightson draws on the knowledge and expertise of 2,700 staff -- and
the services of diverse business units, alliances and partnerships -- to
meet the needs of more than 90,000 clients across New Zealand. The company
has growing operations in Australia and South America. It was formed in
October 2005 through the merger of Pyne Gould Guinness and Wrightson. PGG
and Wrightson dated from 1851 and 1841 respectively.
New York Stock Exchange listed Agria Corporation, ticker "GRO", is an
innovative China-based agri-solutions provider focusing on research and
development, production and distribution of three different types of
upstream agricultural products. Its diversified portfolio of products
comprises corn seeds, sheep breeding and seedlings, including proprietary
products. Agria processes and packages corn seed products and sells them to
local and regional distributors. It produces and sells sheep breeding
products (frozen semen, embryos, breeder sheep and Primalights III hybrid
sheep) primarily to government-operated breed improvement and reproductive
stations, breeding companies and other sheep reproductive stations and
farms. The Company also produces and sells blackberry, raspberry and date
seedlings to end users such as municipal agencies and seedling companies;
and white bark pine seedlings for urban greenery. Agria has a strong
research and development base and extensive relationships throughout
China's agricultural sector, including preferential access to one of the
largest seedbanks in the world through a joint venture with the China
National Academy of Agricultural Sciences (CNAAS). CNAAS is one of the most
important research groups in China, owning 39 research institutes covering
all major areas in the agricultural sector. CNAAS has chosen Agria to
commercialise its research and technology through a majority equity
investment in Zhongnon (China Agricultural Seed Company) and a strategic
co-operation agreement between CNAAS and Agria. Agria's website is
www.agriacorp.com.
Agria Corporation Safe Harbor Statement:
This announcement contains forward-looking statements. These statements are
made under the "safe harbor" provisions of the U.S. Private Securities
Litigation Reform Act of 1995. These forward-looking statements can be
identified by terminology such as "will," "expects," "anticipates,"
"future," "intends," "plans," "believes," "estimates," "confident" and
similar statements. Agria may also make written or oral forward-looking
statements in its periodic reports to the U.S. Securities and Exchange
Commission on Forms 20-F and 6-K, etc., in its annual report to
shareholders, in press releases and other written materials and in oral
statements made by its officers, directors or employees to third parties.
Statements that are not historical facts, including statements about
Agria's beliefs and expectations, are forward-looking statements.
Forward-looking statements involve inherent risks and uncertainties. A
number of important factors could cause actual results to differ materially
from those contained in any forward-looking statement. Potential risks and
uncertainties include, but are not limited to, those risks outlined in
Agria's filings with the U.S. Securities and Exchange Commission. All
information provided in this press release is as of the date of this
announcement unless otherwise stated, and Agria does not undertake any
obligation to update any forward-looking statement, except as required
under applicable law.
Attached:
Summary of Co-operation Agreement
Strategic Cooperation Agreement - Summary
Rationale for co-operation agreement
PGG Wrightson Limited (PGW) and Agria Corporation (Agria) have agreed to
establish a long-term relationship through a strategic Co-operation
Agreement.
The agreement will promote co-investment by Agria and PGW, allowing Agria
to work alongside a proven management team with world leading experience in
agriculture.
PGW and Agria have agreed to enter into strategic cooperation in specific
areas, and also expect that other opportunities may arise from time to
time. They have committed to develop the principles of the Co-operation
Agreement into actionable business plans and delivery of tangible financial
benefits.
As an overriding principle of co-operation the parties agree that this
should be through joint ventures in and out of China. These will be held in
proportion to the ratio of capital contributed but in no case would one of
the parties hold less than 30 percent unless by mutual consent. Both
parties agree that the joint ventures may necessarily involve additional
parties.
The Parties will further evaluate the types of products/services, total
investment, project locations, distribution channels, ownership of
intellectual property, branding and marketing, and other factors for the
project.
Areas for co-operation
1. Seeds
Joint development and commercialisation of cultivars that Agria, PGW, and
their development partners have access to internationally. This would see
the licence of intellectual property held by PGW licensed in China and
internationally, and give PGW access to Chinese intellectual property.
PGW has development partners in the form of joint ventures and
collaborations in New Zealand, Australia, Argentina, Brazil, France, the
United Kingdom, the United States and Uruguay.
Agria has an extensive relationship with the China National Academy of
Agricultural Science ("CNAAS") and through its strategic shareholding in
Zhongnon (China Agricultural Seed Company), a company jointly owned by
Agria and CNAAS to commercialise CNAAS intellectual property.
PGW and Agria have agreed to co-operate in commercialisation of cultivars
where they have existing distribution channels or access to new markets and
territories.
Initially, access to the Chinese market may be provided through Agria's
existing operations; and later through joint ventures.
The parties have agreed to expand CNAAS advanced technologies for
development of seed cultivars in China and other territories.
2. Livestock
PGW and Agria have agreed that New Zealand has exceptional livestock
experience which can be utilised in China. The form of co-operation
envisaged is for Agria to source livestock needs in China and for PGW to
fill those needs through live export, from New Zealand, Uruguay, and
selected markets.
Additionally, the parties will co-operate to promote reform in livestock
trading in China. Using New Zealand's and PGW's technical experience with
livestock auction systems, the parties will work to initiate reform in
these markets, specifically the establishment of an auction system in
China.
3. Agricultural Services and Science Development
Agria and PGW will work to develop research farms in China that will seek
to exhibit and test specific farming practices, systems and technologies,
focussing on grass type, stock varieties, irrigation and animal health
practices.
With a view to enhancing productivity in countries and areas of joint
focus, the parties will explore opportunities to foster collaboration
between New Zealand agriculture based tertiary institutions (and other
institutions with which PGW has relationships around the world) and Chinese
agricultural and science universities. Such collaboration will be in
respect of, but not limited to, the development of commercially focussed
research and learning in:
-- Animal science (including dairy and livestock production),
-- Plant science (including pasture management, agronomy and crop
science),
-- Soil science, and
-- Biosciences
4. Finance
Agria will work with PGG Wrightson Finance to identify additional funding
options for growth through third party sources. The benefit for the
funding provider will be access to lending expertise in the rural finance
sector.
5. Rural Services - China
PGW and Agria have agreed that, as the Chinese agricultural market does not
have a mature provider of rural services, they will carry out
investigations on development of a rural services business in China using a
joint venture model.
The business will necessarily be different from the New Zealand based
business, but will draw heavily from PGW management experience and
expertise, with capital being largely provided by Agria and its Chinese
connections.
The initial focus of such a joint venture will be rural merchandise,
irrigation and pumping services, warehousing, marketing and export, and
specialist advice.
6. Dairy Farm conversion and development
Agria and PGW believe there is great merit to certain aspects of the
business model encapsulated in the NZ Farming Systems Uruguay model, which
is based upon a large scale dairy conversion managed by PGW. The Parties
will seek to replicate such a model in other regions and countries where
the business case can be proven, including China, with the intention that
Agria will have a first call option for the purchase of produce provided
that it is destined for China.
The basis for joint ventures in this area will be to use PGW management and
Chinese capital. Agria will endeavour to acquire the necessary land within
the PRC to apply this business model.
7. Co-operation in PRC-financed cross-border agricultural investment
PGW and Agria agree to collaborate in future investment in agricultural
investment worldwide, including further investment in New Zealand and South
America, through financing obtained within the PRC. Agria agrees to
endeavour to solicit and obtain financing and loans from domestic PRC
financial institutions for possible reinvestment abroad.
In addition PGW and Agria agree on a best endeavours basis to identify
methods of securing China based investment capital to PGW businesses
(and/or PGW and Agria joint ventures) where this may provide a competitive
advantage to PGW and Agria, or enable growth of a specific business unit.
Implementation
The Parties will establish a steering committee comprised of six (6)
members from the senior management of each. The Steering Committee will
have the overall responsibility of determining and overseeing the parties'
co-operative projects.
Term
The Co-operation Agreement is for a period of ten (10) years. It can be
terminated early or extended by mutual agreement, or by one party in
circumstances specified in the Agreement.
Contact Information: Contact details for further information PGG Wrightson: Keith Smith Chairman Tel: 64 9 308 1877 Mobile 64 21 920 659 Tim Miles Managing Director Tel: 64 3 372 0800 Mobile: 64 21 567 600 Agria Corporation: In China: Matt Feng Investor Relations China Tel: 133-1130-0320 Matt.feng@agriacorp.com In the US: David Pasquale Senior Vice President U.S. Tel +914-337-1117 David.pasquale@agriacorp.com