Two of NZ's biggest agricultural companies have resolved a failed merger deal with the help of South Island millionaire Allan Hubbard reports Business Day. His finance company South Canterbury Finance lent PGG Wrightson $25 million to make a payment to NZ's biggest meat company Silver Fern Farms, as compensation for a failed merger. SFF is also taking a long term stake in PGG Wrightson. The companies SFF and PGG Wrightson said they had resolved a long-running dispute following the breakdown of the deal. ". Yesterday's resolution came via a mediation process, and has resulted in a full and final settlement the companies say. The financial settlement includes three key elements: PGGW paid SFF $25m yesterday. SFF keeps $5m paid by PGGW previously, of which $3.5m was for costs incurred by it. SFF gets 10 million ordinary shares in PGGW with the chairman Eoin Garden saying SFF intends to remain a long-term shareholder. That adds up to around $42m, which PGGW chairman Craig Norgate said equated to about 15c in the value of a PGGW share. He said the shares had been discounted a lot by the market over uncertainty related to the failed merger and the resulting legal talks between the companies. Market commentators have said the failed $220m deal has weighed on PGGW's share price, which yesterday closed steady at $1.20 within a 12-month range of 59c to $2.95. Norgate noted the "very supportive" involvement of South Canterbury Finance chairman Allan Hubbard whose company has provided a facility of up to $25m of subordinated debt, enabling the payment by PGGW outside existing banking agreements.
Garden said the settlement provided significant redress to Silver Fern Farms for the damages arising from PGGW's inability to complete the 2008 transaction. Norgate said while the settlement bought the companies closer together it should not be construed as another attempt at a merger."You wouldn't call it a merger or anything like that, but certainly it is a settlement that leaves us clear to work together at an arm's length basis."
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