2 Oct 2008

Global turmoil puts PGG Wrightson deal in limbo

7:05 am on 2 October 2008

A major deal between PGG Wrightson and Silver Fern Farms has been thwarted due to the global turmoil in financial markets.

The rural services company says extreme financial market conditions have prevented it from buying a 50% stake in meat processor Silver Fern Farms, formerly known as PPCS.

PGG Wrightson was to pay $220 million for its stake in the co-operative and was due to make a $145 million payment on Tuesday. The remaining $75 million is due in March next year.

However, it has advised Silver Fern Farms that it cannot make the payment because of the current instability in global and domestic financial markets.

PGG Wrightson says the banks did not finalise their credit approvals in time and planned share issues to raise $110 million have been delayed.

The company says it will know by the end of the week whether the deal with Silver Fern Farms will go ahead.

PGG Wrightson chairman Craig Norgate says banks have further tightened their belts on credit after American lawmakers failed to pass a $US700 billion bailout of troubled US financial systems.

Mr Norgate says the current agreement with Silver Fern Farms will need to be revisited with all parties and the company is working with Silver Fern Farms to decide where the proposal goes from here.

He says the banks have no concerns about the financial performance of the two companies, both of which posted big increases last year.

audio:http://www.radionz.co.nz/audio/national/ckpt/2008/10/01/pgg_wrightson_cuts]Hear more on Checkpoint

Business as usual - Silver Fern Farms

In the meantime, Silver Fern Farms chief executive Keith Cooper says it is business as usual.

Silver Fern Farms has reduced its debt by $115 million over the past 18 months.

The New Zealand share market reacted positively to news the deal will be delayed until credit markets settle.

At the close of trade on Wednesday the NZX 50 was up 3%, while shares in PGG Wrightson rose 29 cents to $1.89, after closing at $1.60 the previous day.