PGG Wrightson buys half of Uruguayan rural services firm

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PGG Wrightson chief executive Mark Dewdney.
NZ Farmer | 15 July 2015

PGG Wrightson buys half of Uruguayan rural services firm

by MARTA STEEMAN

Leading rural servicing firm PGG Wrightson, half Chinese-owned, has purchased a 50 per cent share in a Uruguay farm servicing company Agrocentro Uruguay.

The company says it is a similar but smaller business than PGG Wrightson.

Financial details were not disclosed except PGG Wrightson said the transaction involved an upfront payment and a capped earn out component over the next three years based on the performance of the business,

Agrocentro Uruguay started in early 2007 in the east of Uruguay. It has four business units - retail and distribution of agricultural products, farming, logistics and consulting services- and 120 staff including 28 agronomists and veterinarians and eight retail branches.

PGW, whose Chinese shareholder is Agria Corporation, said the Uruguayan firm had had impressive growth and had been a strategic partner for PGW's seeds business and is its largest customer in South America. it was also the biggest seed producer for PGG Wrightson.

Chief executive Mark Dewdney said the transaction aligned with the company's growth strategy in South America where PGW saw its biggest growth opportunities outside of New Zealand.

The purchase gave PGW the ability to directly influence the direction and pace of growth at Agrocentro as well as getting a share of its retail margins.

Dewdney said the upfront payment was " a relatively small amount" and the sellers of the company- Carlos Escudero and Luis Bonino - had asked for confidentiality at this stage but the price would be revealed in its annual report. The price was not a material amount under NZX rules requiring disclosure.

The price that would be paid, including the earnouts over three years, would be in the range of 3.5-5 times Agrocentro's earnings before interest, tax, depreciation and amortisation (ebitda), Dewdney said, and both parties were happy with that.

Agrocentre had revenues of about US$35 million a year, impressive growth for a company that started from scratch eight years ago. PGW's business in Uruguay was worth about US$100m a year.
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It was like PGW in the services it provided, mostly to the beef, sheep and cropping farming community, Dewdney said, and it was one of the bigger farm servicing companies in Uruguay.

After settlement, targeted for August 31, the companies would continue to operate separately but would work together to consolidate their operations where that made sense to provide farmers with better services.
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