PGC to distribute its entire 72% 'Heartland Bank' stake to existing investors if offer for PGG Wrightson shares goes unconditional

By Gareth Vaughan

Pyne Gould Corporation (PGC), which holds about 72% of Building Society Holdings after its subsidiary Marac Finance merged with two building societies, says it will now distribute the entire stake in the would-be bank to existing shareholders should Agria Corporation's partial takeover offer for PGG Wrightson go unconditional.

PGC has signed a Lock-Up Deed with Agria, under which PGC has agreed to accept the Agria 60 cents per share offer for its 18.3% stake in PGG Wrightson.

Agria, which already holds 19% of PGG Wrightson, is seeking 50.01%. PGC now says that should Agria's offer go unconditional, it won't need to place some of its Building Society Holdings stake with institutional investors and will instead distribute the entire 72% to existing shareholders.

"The placement was originally intended to fund repayment of the outstanding balance (being approximately NZ$27 million) of the Loan Notes (“P Note”) issued by Marac Financial Services Limited, a wholly owned subsidiary of PGC, to Marac Finance Limited, a wholly owned subsidiary of BSH," PGC said.

"It is now intended to fund repayment of the P Note using proceeds of the sale of PGG Wrightson shares under the Agria offer. Repayment of the P Note will increase the cash on the Building Society Holdings group’s balance sheet by NZ$27 million."

The Building Society Holdings shares would be distributed "as soon as practically possible" via a scheme of arrangement that needs court and PGC shareholder approval.

"Timing depends on when Agria’s offer becomes unconditional, but if that occurs around 15 April (i.e. near the offer's closing date), scheme documents will be sent to shareholders in late April and the distribution will be targeted for completion by late May, allowing for the shareholder notice period and the court approval process," PGC said.

Given Agria's offer is a partial takeover bid, PGC said its acceptance would be subject to scaling and this could result in it continuing to own some PGG Wrightson shares.

Other than using a portion of the proceeds from selling PGG Wrightson shares to repay the P Note, PGC said it would also use about NZ$5 million for working capital and expenses for PGC's ongoing businesses, with any remaining cash, together with any remaining PGG Wrightson shares, to either be distributed to shareholders, or - subject to any necessary regulatory or shareholder approvals - be used to provide equity financing assistance to Building Society Holdings.

PGG Wrightson Finance in sights

Jeff Greenslade, managing director of Building Society Holdings, told interest.co.nz last week he was interested in buying PGG Wrightson Finance should it be available.And PGG Wrightson's target company statement responding to the Agria offer notes it has been reviewing the possible divestment of PGG Wrightson Finance’s finance book for some time.

"Equity financing assistance may, for example, be provided by PGC to Building Society Holdings by PGC subscribing for further Building Society Holdings shares, in which case PGC would intend to also distribute those shares to PGC shareholders," PGC said.

Although PGG Wrightson disclosed last week that it has received an approach from another party that has indicated an interest in making a full takeover offer, PGC says it has committed to sell its shares to Agria, should Agria’s offer become unconditional.

"PGC is not in a position to comment on the likelihood of any competing offer eventuating or becoming unconditional."

Will keep and seek to grow Perpetual and Torchlight

Meanwhile, PGC says after reviewing its remaining businesses it has decided to keep and strive to grow  wealth management businesses Perpetual Group and Torchlight Group across New Zealand and Australia.

"PGC has the financial strength, operating platforms and human resources to deliver long term growth for shareholders, delivered in a favourable strategic environment of ageing demographics and supportive government savings policies," the company said.

There were "surplus assets" in PGC's Real Estate Credit Group, which took on toxic p[property loans from Marac, with surplus assets to be realised over time to maximise cash returns with any resulting proceeds returned to shareholders.

Perpetual Group, with a "substantial" client base and NZ$587 million in funds under management, will continue focusing on both personal and institutional wealth management services.

The George Kerr chaired private equity entity Torchlight Group, will focus on wealth management in proprietary funds across Australia and New Zealand.

"A comprehensive plan including details of strategy and human resource will be presented to shareholders at the Special Annual Meeting to be held to approve the distribution of Building Society Holdings shares," PGC said.

Board changes, Greenslade to leave PGC

Once Building Society Holdings' shares are distributed and PGC's PGG Wrightson shares are sold or distributed, Bruce Irvine will be replaced as PGC chairman by Bryan Mogridge and will resign as a director, Jeff Greenslade will resign as CEO and director of PGC to focus full time on running Building Society Holdings, with the PGC board to consist of chairman Mogridge, Kerr, Torchlight managing director John Duncan and one other independent director.

Building Society Holdings, created by merger of Marac Finance, CBS Canterbury and the Southern Cross Building Society last month, aims to apply to the Reserve Bank for a banking licence in July. The merger plan calls for Building Society Holdings, or the proposed "Heartland Bank", to double its asset base within five years through growing lending to families, small businesses and the rural sector.