Norgate’s last stand?

The Press (not online) reports that Craig Norgate has given up on Rural Portfolio Investments, the parent company of Rural Portfolio Capital:

Norgate has essentially thrown in the towel on Rural Portfolio Investments . . . saying he cannot raise enough funds for the next dividend on the $60m of preference shares.

It is unlikely the preference shareholders will get the face value of that $60m investment back in the short term and the market has already priced in a much lower return.

The security for the RPC preference shares is 46.76m PGG Wrightson shares (which closed at 53c yesterday) and 10m NZ Farming Systems Uruguay (NZFSU) shares (41c) was well as $742,314 held in a dividend escrow account. . .

RPI and its financing subsidiary Rural Portfolio Capital are the investment vehicles for Norgate and the Otago-based McConnon family, and will very likely be wound down. . .

Norgate contributed to the McConnon family fortune when, as general manager of Kiwi Dairy, he bought Mainland Products from them. He’s now taken a large chunk of that away through his encouragement for them to invest in PGW.

He thought he could capture the rural servicing market by amalgamating Williams and Kettle, Pyne Gould Guiness and Wrightson. But farmers never bought into his plans and the combined market share of those companies fell from more than 70% to less than 50%.  PGW’s share price went from around $2. 80  two years ago to just 53 cents on Friday.

The decline of PGW provided opportunities for competitors Combined Rural Traders and new companies of stock agents set up by former PGW agents, including Hazlett Rural and Rural Livestock.

The only positives for PGW at the moment are the arrivals of Sir John Anderson as chairman of the company and former PGG general manager George Gould as a director.

One of Norgate’s biggest mistake was failing to gain finance for the purchase of 50% of Silver Fern Farms. While the financial meltdown has been blamed for this many farmers cannot believe how he ignored the fundamental basics of business which require securing funding before doing a deal.

His foray into dairying in Uruguay was big on promises but has yet to deliver. Share prices peaked at $2 and were at 41 cents on Friday.

From the outside, the investment in Uruguay looked simple. However, Norgate failed to take full account the challenges of farming in South America with language, cultural and political difficulties and a very different climate from New Zealand.

You only have to look  at the difficulties New Zealand companies have when investing in Australia, where at least the language, culture, banking and legal systems are similar, to realise that what works so well here might not  transfer easily to Uruguay.

4 Responses to Norgate’s last stand?

  1. Adolf Fiinkensein says:

    Good old Wrightsons. eh? You will be amused to hear an anecdote from the mid eighties when I was managing a rural sales team and visiting farmers in the Maniototo basin.

    I was accosted by an elderly gentleman who regaled me with what a pack of bastards Wright Stevenson had been during the nineteen thirties – just as they were then in 1985. His name was McSkimming and he will be long dead now.

    They’ll still be taking about Norgate fifty years from now.

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  2. Fredinthegrass says:

    Oh! How the mighty fall. The shame of it all is the innocent/ignorant they take with them.
    I look forward to the next “must have” investment/con.
    I will NOT be taking it up!

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  3. Raymond A Francis says:

    Some of us have been waiting for Norgate to come a cropper since his Taranaki days, plenty of promises not much realities
    McSkimmings are like rabbits, everywhere in Central
    Certainly plenty of them there still

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  4. Gravedodger says:

    My Lifetime of involvement in the rural servicing sector has had me watching with amusement and for a while in the late 80s, deep sympathy for the personal tragedy involved, when a succession of people in possession of a degree of ability in the eyes of some business commentators, attempted to apply the efficiency theory that should follow a consolidation of entities that traditional business teaching says will deliver profit, when applied to stock and station companies.
    They all discount or more likely ignore the very deep bond of loyalty that the client base of these companies have with their company. That loyalty is very strong but fragile at the same time. At the outset of my farming career for better or worse Pyne Gould Guinness had an almost familial aspect to our relationship. The company financed me, conducted nearly all my livestock,wool,fodder,grazing,fertilizer,grain and seed dealings, my insurance, estateplanning,accountancy, farm management advice and some bulk grocery. It was not healthy but it was the best way to get a start and to their credit they never abused the power they held over me/us. Some clients of other companies were subjected to forced grazing, purchasing and other functions that the “client only complied with as the choice was buried under their financial obligation to the company. As soon as possible we separated our financial planning,banking and budgeting away and slowly the other dependence dissolved.
    Anecdotal evidence was widely believed that companies in the emergence from the 30s depression assisted strong clients at the expense of the weaker ones,Darwinism I guess. However those companies and clients developed a loyalty that was so strong, almost tribal, that when National Mortgage set out on an amalgamation program in the 50s they acquired smaller companies such as Matson & Co, Levin and Co,Murray Roberts and others but the only clients they acquired were the “tied” as those who could, went to another company often through an Agent they could trust rather than trade with a company that had shafted or otherwise taken advantage of someone they knew personally.
    Then WrightStephenson and NMA emerged,then Rod Weir, later knighted, absorbed Dalgety’s into the Farmers Co-op (itself a creation of an amalgamation of various regional companies that had started as true Co-ops), that company then merged with Elders of Australia and boy were there some shonkey buggers in that mob. That was when it became personal as I was the rural Real estate salesman for a substantial chunk of the lower North Island, working with my lifetime partner Mrs GD for the enlarged Elders company, as a save our farm from the bankers move following the Douglas reconstruction of N Z’s economy. Through all this two Regional companies PGG and Williams & Kettle in Hawkes bay remained aloof,strong and independant until along came “Jones” with the name of Norgate (how apt with the Watergate name being associated with modern disasters).
    With every one of these “big business” moves one constant followed, strong clients went their own way and the best “agents went their own way, often forming strong independent companies and serving the strong independent clients whose loyalty was often to the agent not the company and any benefit from consolidation evapourated faster than 10mm of rain in a drought.
    That Fonterra has gone along as it has is to me a minor miracle and I sometimes wonder ‘what if’ Norgate had prevailed when that consolidation went through. There have been some holdouts and new ventures in the dairy industry subsequent to the Kiwi NZ Dairy “marriage” but it still seems healthy in general but without Mr Norgate.
    When we moved to the Wairarapa there were still,I think, four dairy Co-ops and 20 years later They had consolidated to the plant at Pahiatua and the milk all went to Hawera for processing then the amalgamation to form Fonterra and there appeared to be nothing like the contretemps that went with the similar consolidation of stock and station coys.
    If Craig Norgate involves himself with any enterprise I have money in, I will be gone by lunchtime and hope to get my funds out before he gets his grubby dooks on the said funds.

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