Norgate’s last stand?

03/05/2010

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.


What goes round . . .

20/08/2009

The proposed merger between PGG Wrightson and Silver Fern Farms riled some farmers so much they took their business from PGW.

That loss was Combined Rural traders’ gain and is one of the reason the co-operative did so well last year.

However, what goes round comes round. CRT’s purchase of a livestock company has upset SFF and prompted it to take its business away from the co-ooperative.

Business is business and any company has the right to enter the market. 

CRT has a large client base and will be counting on that to give them a good start. However, the livestock market is already crowded ansd success in the business relies on strong personal relationships between agents and clients rather than brands.

The challenge for CRT, like every other stock firm,  will be to employ the best people in the field.


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