Combined Special and 2018 Annual Shareholders Meeting

8 October 2018
Dear Shareholder
Combined Special and Annual Meeting
The PGG Wrightson Limited (PGW) board of directors is pleased to invite you to the combined Special Meeting
and 2018 Annual Shareholders meeting (the Meeting) to be held at the Show Gate Lounge, Riccarton Park,
165 Racecourse Road, Christchurch on Tuesday, 30 October 2018, commencing at 9:30am.
The Meeting has been called to cover the general business that is conventionally covered at the Annual Meeting
and to also consider, and if thought fit, approve by special resolution the sale by PGW of all of the shares in PGG
Wrightson Seeds Holdings Limited to DLF Seeds A/S under the Agreement for Sale and Purchase of shares dated
4 August 2018 (the Seeds Sale).
Accompanying this letter is the Notice of Meeting and Proxy Form that sets out the background to the resolutions
that will be put to shareholders at the Meeting, as well as explanatory notes explaining their rationale and the
recommendations of your board of directors.
In addition, you also find enclosed an Independent Appraisal Report from KordaMentha. Although the Independent
Appraisal Report is not specifically required under the NZX Listing Rules, the board of directors have engaged
KordaMentha to prepare the report to assist shareholders to appraise the implications of the Seeds Sale. The report
forms part of the explanatory notes and discusses the Seeds Sale in relation to the special resolution at Item V of the
Notice of Meeting. Shareholders are encouraged to read the report.
The report concludes that in KordaMentha’s opinion, “the consideration and terms and conditions of the Proposed
Transaction are fair to PGW’s non-associated shareholders.”
Yours faithfully
Trevor Burt
Deputy Chairman
PGG Wrightson Limited
PGG Wrightson Limited
57 Waterloo Road, Hornby
Christchurch 8042
PO Box 292, Christchurch 8140
New Zealand
Telephone +64 3 372 0800
Facsimile +64 3 344 5195
www.pggwrightson.co.nz
Letter from the PGG Wrightson Board
Helping grow the country

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NOTICE OF COMBINED SPECIAL AND ANNUAL MEETING | 1
Notice of combined Special and Annual Meeting
Notice is hereby given that a combined Special Meeting and the 2018
Annual Meeting of Shareholders of PGG Wrightson Limited (“Company”)
will be held at Riccarton Park (Show Gate Lounge), 165 Racecourse Road,
Christchurch on Tuesday, 30 October 2018, commencing at 9.30am.
General Business
The general business will be:
Item I. To hear addresses by the Deputy Chairman and Chief Executive Officer.
Item II. Ordinary resolution: To consider and, if thought fit, to re-elect as a Director of the
Company Kean Seng U who retires by rotation in accordance with the Company’s
Constitution, and being eligible, offers himself for re-election
– Resolution 1.
(See Explanatory Note 1)
Item III. Ordinary resolution: To consider and, if thought fit, to re-elect as a Director of the
Company Lim Siang (Ronald) Seah who retires by rotation in accordance with the
Company’s Constitution, and being eligible, offers himself for re-election
– Resolution 2.
(See Explanatory Note 2)
Item IV. Ordinary resolution: To authorise the Directors to fix the auditor’s remuneration
– Resolution 3.
(See Explanatory Note 3)
Item V. Special resolution: To consider, and if thought fit, pass the following special
resolution:
To approve the sale by PGG Wrightson Limited of all of the shares in PGG Wrightson
Seeds Holdings Limited under the Agreement for the Sale and Purchase of shares in PGG
Wrightson Seeds Holdings Limited dated 4 August 2018 between PGG Wrightson Limited
(as seller), DLF Seeds A/S (or its nominee) (as purchaser) and DLF Seeds A/S (as guarantor),
as required by section 129 of the Companies Act 1993 and rule 9.1.1(b) of the NZX Main
Board/Debt Market Listing Rules.
– Resolution 4.
(See Explanatory Note 4)
Item VI. To consider any other business that may properly be brought before the combined
Special and Annual Meeting.

2 | NOTICE OF COMBINED SPECIAL AND ANNUAL MEETING
Attendance and Voting
The resolutions required for agenda items II to IV (Resolutions 1 to 3) are ordinary Resolutions,
requiring a simple majority of the votes of those shareholders entitled to vote and voting on the
Resolutions.
The resolution required for agenda item V (Resolution 4) is a special Resolution, requiring a majority of
75% of the votes of those shareholders entitled to vote and voting on the Resolution.
The only persons entitled to exercise votes at the Meeting will be those who are registered as
shareholders as at 9.30am on Sunday 28 October 2018 and only the shares registered in those
shareholders’ names at that time carry a right to vote at the Meeting. Your rights to vote may be
exercised by:
1. Attending and voting in person: or
2. Postal voting: Postal voting instructions accompany this Notice of Special and Annual Meeting.
Shareholders wishing to vote by post must complete and send the postal form so that it is received by
Computershare Investor Services Limited no later than 9.30am on Sunday 28 October 2018, or
3. Electronic Voting: Electronic or online voting instructions accompany this Notice of Special and Annual
Meeting. Shareholders wishing to vote electronically must do so no later than 9.30am on Sunday 28
October 2018, or
4. Appointing a proxy (or representative) to attend and vote in your place: The proxy need not
be a shareholder of the Company and the form of appointment of a proxy and voting instructions
accompanies this Notice of Special and Annual Meeting. Shareholders wishing to appoint a proxy (or
representative) must complete and send the proxy form so that it is received by Computershare Investor
Services Limited no later than 9.30am on Sunday 28 October 2018.
Direct your proxy how to vote by making the appropriate election, either online or on the Proxy Form,
in respect of each resolution. If you return the Proxy Form without directing the proxy how to vote
on any particular matter, the proxy may vote as he/she thinks fit or abstain from voting. If you make
more than one election in respect of a resolution your vote will be invalid on that resolution. If you
expressly appoint the Chair of the meeting or any other Directors as your proxy and elect to give them
discretion on how to vote on a resolution, you acknowledge that they will exercise your vote in favour
of the resolutions.
Following the formal part of the Meeting, the Directors invite shareholders to join them for light
refreshments.
By order of the Board of Directors.
Julian Daly
General Manager, Strategy & Corporate Affairs
(and Company Secretary)
Christchurch
New Zealand
8 October 2018

Explanatory Notes
NOTICE OF COMBINED SPECIAL AND ANNUAL MEETING | 3
1. Election of Directors
KEAN SENG U
LLB (Hons), B.Ec
Director
Kean Seng U is a current Director of PGG Wrightson Limited and joined the PGG Wrightson Board on 4 December 2012.
Kean Seng retires by rotation in accordance with the Company’s Constitution, and being eligible, offers himself for re-
election.
Kean Seng is Head of Corporate and Legal Affairs for Agria Corporation, a role he has held since December 2008. Kean
Seng previously practiced as a partner at Singaporean law firm, Shooklin & Bok LLP, focused on East Asia, and he led a
corporate finance team in Allen & Overy Shooklin & Bok, JLV, an international law venture partnership with London based Allen & Overy
LLP. Kean Seng sits as an independent and non-executive director of several public listed corporations. He received a Bachelor of Laws
(Honours) degree from Monash University Australia. He is a Barrister and Solicitor, Supreme Court of Victoria, Australia; Advocate and
Solicitor, Supreme Court of Singapore and Solicitor of England and Wales. In addition to his extensive legal knowledge, Kean Seng is also
a qualified economist, having completed his degree majoring in Economics and Accounting, B.Ec at Monash University, Australia. Kean
Seng U is an associated person of substantial security holder Agria (Singapore) Pte Limited. The Board has determined that he does not
qualify as an Independent Director as defined by the NZSX Listing Rules.
The Company’s Directors recommend shareholders vote in favour of Kean Seng U’s re-election.
2. Election of Directors
RONALD SEAH
B.Soc.Sc (Hons in Economics)
Independent Director
Ronald Seah is a current Director of PGG Wrightson Limited. He was appointed to the PGG Wrightson Limited Board on
4 December 2012. Ronald retires by rotation in accordance with the Company’s Constitution and being eligible, offers
himself for re-election.
Ronald is a Singapore Citizen with a background in banking and fund management. Over a 26 year period between
1980 and 2005, he had held various senior positions within the AIG Group in Singapore, initially as AIA Singapore’s Vice-
President and Chief Investment Officer where he was responsible for managing the investment portfolio of AIA Singapore and later as AIG
Global Investment Corporation (Singapore) Ltd’s Vice President of Direct Investments. Between 2001 and 2005, Ronald was the Chairman
of the Board of AIG Global Investment Corporation (Singapore) Ltd. From 1978 to 1980, Ronald managed the investment portfolio of Post
Office Savings Bank as Deputy Head of the Investment and Credit Department. Prior to that, he worked at Singapore Nomura Merchant
Bank as an Assistant Manager where he was responsible for the sale of bonds and securities and offshore (ACU) loan administration for
the Bank. Between 2002 and 2003, Ronald served on the panel of experts of the Commercial Affairs Department of Singapore.
Ronald currently serves as independent director on the board of a number of listed companies in Singapore, namely Global Investment
Limited, Yanlord Land Group Ltd; and Telechoice International Ltd. He is also a director of M&C REIT Management Limited and M&C
Business Trust Management Limited. Ronald is Chairman of Nucleus Connect Pte Ltd, a fibre broadband company in Singapore.
Ronald graduated with a Bachelor of Arts and Social Sciences (Second Class Honours - Upper) from the then University of Singapore in
1975. The Board has determined that Ronald Seah qualifies as an Independent Director as defined by the NZSX Listing Rules.
The Company’s Directors recommend shareholders vote in favour of Ronald Seah’s re-election.
3. Auditors
Noting the automatic reappointment of KPMG as the Company’s auditor under section 207T of the Companies Act 1993, the proposed
ordinary Resolution is to authorise the Directors to fix the auditor’s remuneration for the following year for the purposes of section 207S
of the Companies Act 1993.
The Company’s Directors recommend shareholders vote in favour of this Resolution.

Explanatory Notes
4 | NOTICE OF COMBINED SPECIAL AND ANNUAL MEETING
4. The Sale by the Company of all the shares in PGG Wrightson Seeds Holdings Limited
Overview
On Monday 6 August 2018, PGG Wrightson Limited (PGW) announced the conditional sale of PGG Wrightson Seeds Holdings Limited
(which owns and operates PGW’s Seed and Grain business in New Zealand, Australia, South America and internationally)(PGW Seeds)
to DLF Seeds A/S (DLF) for a price of approximately NZ$421 million (subject to an audited special purpose statement of financial position
as at 30 June 2018) (the Seeds Sale). A copy of our announcement is available at https://www.pggwrightson.co.nz/Our-Company/NZX-
Announcements.
DLF is a Denmark-based global seeds group and was established in 1872 and is co-operatively owned by about 3,000 Danish seed
growers. DLF operates within forage and turf seed, sugar and fodder beet seed, seed potatoes and multiplication of vegetable seed, and
is active in more than 80 countries. DLF’s vertically integrated operations (in research, production and sales) have approximately 1,200
employees, 12 percent of which are involved in research and development.
The Seeds Sale is conditional on, amongst other things (detailed below), approval by PGW’s shareholders as a special resolution
(Shareholder Approval Condition). That approval is being sought from shareholders at the meeting. A special resolution is required
because the Seeds Sale is a ‘major transaction’ for the purposes of section 129 of the Companies Act 1993 (the Companies Act) (that is, it
involves the disposal of assets of PGW the value of which is more than half the value of PGW’s assets before the disposition). As at 30 June
2018, the book value of PGW Seeds represents approximately 56% of the total book value of PGW’s assets.
If PGW’s shareholders do not approve the Seeds Sale by 12 November 2018 then the Sale and Purchase Agreement will be at an end,
unless all parties agree to an extension in writing.
Key transaction details
The Seeds Sale is documented by an agreement dated 4 August 2018 under which PGW agrees to sell all of the shares in PGW Seeds to
DLF (or its nominee), with the obligations of DLF’s nominee guaranteed by DLF (the Sale and Purchase Agreement).
The key terms of the sale, as set out in that Sale and Purchase Agreement, are as follows:
Conditionality
In addition to the Shareholder Approval Condition (described above), the Sale and Purchase Agreement is also conditional upon:
1. DLF receiving consent to the transaction under the Overseas Investment Act 2005;
2. New Zealand Commerce Commission clearance, Australian Competition and Consumer Commission approval and receipt of
applicable regulatory approvals in South America; and
3. change of control consents from certain of PGW Seeds’ joint venture partners, being Grassland Innovations Limited, Forage
Innovations Limited and Endophyte Innovations.
The conditions must be satisfied by 4 August 2019. If any or all of conditions are not satisfied by the specified date, then the Sale and
Purchase Agreement will be at an end unless all parties agree to an extension in writing.
The Seeds Sale will be settled on the last business day of the calendar month during which the Sale and Purchase Agreement becomes
unconditional (unless an exception applies or the parties agree otherwise).
Subject to Shareholder approval, completion of the transaction will be dependent on the timing of the relevant regulatory approvals
noted above.
Ongoing commercial relationship
As part of the Seeds Sale, the parties have agreed that PGW and PGW Seeds will enter certain ongoing commercial arrangements on
settlement. Those commercial arrangement are:
•
A distribution agreement, under which PGW will purchase from PGW Seeds, and PGW Seeds will supply to PGW, a variety of seeds,
grains and other products for nine years subject to the terms of the agreement. This distribution arrangement was prepared with the
intention of recording, as far as possible, the current basis on which PGW and PGW Seeds trade with each other (being a preferred
supplier / preferred customer relationship). In particular, where possible, PGW will purchase the majority of its proprietary seed
requirements from PGW Seeds on commercially competitive pricing terms. This is an important relationship and it is noteworthy
that PGW is PGW Seeds’ biggest customer and channel to market. Additionally, PGW Seeds is PGW’s biggest supplier of seed. In the
financial year to 30 June 2018, PGW Seeds sold $63.5 million of product to PGW.

Explanatory Notes
NOTICE OF COMBINED SPECIAL AND ANNUAL MEETING | 5
4. Continued
•
A brand licence agreement, which permits PGW Seeds to continue to use the ‘PGG Wrightson’ brand (and associate intellectual
property rights) for at least nine years in connection with carrying out PGW Seeds’ business. Further, the licence agreement provides
that, if PGW intends to cease using the ‘PGG Wrightson’ brand (or a key element of that branding), PGW Seeds has the right to take
ownership of the brand for a nominal fee.
•
A transitional services agreement to ensure there is a smooth transition in ownership from PGW to DLF following completion of the
sale. Under this agreement PGW will provide certain transitional services on a cost recovery basis for a period of between 12 and 18
months following settlement.
Finalisation of purchase price
Following the completion of the audited consolidated special purpose statement of financial position for PGW Seeds as at 30 June 2018
the purchase price for the Seeds Sale will be reduced to approximately NZ$413 million.
Because the purchase price for the Seeds Sale is being calculated with reference to accounts for the PGW Seeds business as at 30 June
2018 (as opposed to at the date of settlement), this effectively means that the economic benefit and risk of the PGW Seeds business
passed to DLF on 30 June 2018 (assuming the transaction proceeds to settlement). To reflect that PGW will not receive the economic
benefit of the PGW Seeds business during the period from 1 July 2018 to settlement, DLF must pay PGW an additional amount on
settlement as interest for that period.
Interest is calculated on the purchase price at a rate of 0.2283% per month for the period from 1 July 2018 to the settlement date. If
settlement has not completed by 31 December 2018 the interest rate steps up to 0.4167% per month from 1 January 2019 to settlement.
Warranty and indemnity coverage
PGW is providing certain warranties and indemnities under the Sale and Purchase Agreement to DLF relating to title and capacity to
sell PGW Seeds, accuracy of information provided to DLF, contracts, business premises, taxation and intellectual property. However,
DLF’s rights in respect of any breach of a warranty or claim under an indemnity (other than in relation to a claim under the CleanCrop
Indemnity, which is discussed below) are limited in recourse to the amount that DLF can recover under the warranty and indemnity
insurance that DLF has taken out in respect of the Seeds Sale (except where the warranty or indemnity claim arises as a result of fraud
which is attributable to PGW ).
Cleancrop
TM
indemnity
PGW indemnifies DLF under the Sale and Purchase Agreement for certain losses suffered by PGW Seeds arising out of third party claims
made against PGW Seeds in connection with PGW Seeds’ sale of Cleancrop
TM
HT57 swede seed to 556 intended purchasers of Cleancrop
TM

Hawkestone swede seed in the 2017/2018 season. However, PGW’s liability under this indemnity is subject to several exclusions, including
that PGW’s liability is limited to where the compensation paid out by PGW Seeds in total exceeds an agreed maximum value.
What is the recommendation of the Board?
The Board unanimously recommends the Seeds Sale to shareholders for approval and encourages all shareholders to vote in favour of
Resolution 4. In the Board's view the Seeds Sale is in the best interests of PGW and its shareholders.
Why is the Board recommending the transaction?
Sale process
In October 2017, PGW announced that it would engage Credit Suisse and First NZ Capital as strategic advisors to work with the Board and
management team in relation to a comprehensive strategic review of the PGW business.
During the period of the strategic review, Credit Suisse and First NZ Capital received expressions of interest from a number of bidders
wishing to acquire PGW and PGW Seeds. With the Board’s approval, eligible bidders were allowed to undertake due diligence and
participate in a formal tendering process. The Seeds Sale with DLF was identified as the value maximising opportunity for PGW to pursue.
DLF then made a formal offer to acquire the shares in PGW Seeds.

Explanatory Notes
6 | NOTICE OF COMBINED SPECIAL AND ANNUAL MEETING
4. Continued
Why was the Seeds Sale chosen as the preferred option?
The PGW Board considered the price offered by DLF to be compelling relative to PGW’s own valuation of the business when assessing
proposals received for PGW Seeds and arriving at its decision to sell to DLF:
Sale price
The proceeds of approximately NZ$413 million, less expected transaction costs, exceed the book value of PGW Seeds’ net assets
(estimated to be NZ$285 million at 30 June 2018). Following settlement, PGW could expect to have a net cash balance (on a pro forma
basis as at 30 June 2018) of approximately NZ$265 million. In addition, DLF will assume or repay PGW Seeds’ net debt outstanding as at
30 June 2018 of approximately NZ$21 million.
Independent Appraisal Report
The Board has obtained an Independent Appraisal Report from KordaMentha assessing the Seeds Sale. This report supports the Board’s
view that the sale price represents compelling value and a copy is included with this Notice of Meeting. In this report, KordaMentha have
confirmed their opinion that the consideration and terms and conditions of the Seeds Sale are fair to PGW's non-associated Shareholders.
The Independent Appraisal Report also notes that there are no shareholders “associated” with DLF and therefore, “non-associated”
shareholders are all the shareholders of PGW.
Use of proceeds
Subject to outcomes of the ongoing strategic review, the PGW Board could determine to make a non-taxable distribution of available
subscribed capital to shareholders of up to $NZ292 million (subject to receipt of a favourable binding ruling from Inland Revenue). The
PGW Board are considering the optimal mechanism to implement any such return of capital, which could include either:
•
PGW cancelling a pro-rata portion of all shareholders’ shares in accordance with Part 15 of the Companies Act 1993 (Companies Act),
which will apply to each shareholder by default; or
•
PGW offering to acquire and cancel a pro-rata portion of all shareholders’ shares in accordance with section 60 of the Companies Act,
which can be accepted at the option of each shareholder.
The PGW Board is likely to also use the sale proceeds to fund capital expenditure plans and to pay down existing debt.
Key risks
The Board considers the Seeds Sale to be a relatively low risk transaction, given it involves the realisation of assets for cash. There are,
however, some risks arising in relation to the transaction itself, and out of PGW’s position if the transaction is completed, which are drawn
to shareholders' attention in this section.
Risks in relation to the Seeds Sale itself
There is a risk that the Seeds Sale could be delayed, in particular if conditions of the transaction (e.g. the consent of the Overseas
Investment Office) are not satisfied within the expected timeframes. This would delay the receipt of cash proceeds from the transaction.
Also, as described above, the economic benefits of ownership of PGW Seeds accrue to DLF as from 30 June 2018. Delay after this date will
result in the loss of economic benefits which would otherwise accrue from PGW Seeds, although this is mitigated by interest to be paid
by DLF on the purchase price at settlement (as discussed above).
The Seeds Sale could also be cancelled if conditions are not met within the specified timeframes. Cancellation could, for example, occur if:
•
Resolution 4 is not passed at the Meeting;
•
DLF does not obtain consent to the transaction under the Overseas Investment Act;
•
the New Zealand Commerce Commission, or the Australian Competition and Consumer Commission, does not grant the required
clearance or approval (respectively) to the transaction; or
•
one or more of Grassland Innovations Limited, Forage Innovations Limited or Endophyte Innovation (being PGW Seeds’ joint venture
partners) does not consent to the change of control which will occur in connection with the transaction.
PGW is seeking to mitigate these delay and cancellation risks by working closely with DLF to progress satisfaction of the conditions.
Further, DLF can cancel the Seeds Sale in the event that something occurs which adversely affects the consolidated net tangible assets, or
the consolidated EBITDA, of PGW Seeds by at least 15%. However, the events that may trigger this termination right are subject to certain
exclusions, including that the event cannot be adverse weather conditions (excluding an earthquake) or a general change in economic or
regulatory conditions that does not have a disproportionate effect on Seed and Grain business.

Explanatory Notes
NOTICE OF COMBINED SPECIAL AND ANNUAL MEETING | 7
4. Continued
Risks arising if Seeds Sale is completed
PGW will become a materially smaller business on completion of the of the Seeds Sale. PGW will be a less diversified operationally and
geographically given that its business will be entirely New Zealand based. There is a risk that the cost overhead and corporate structure
will exceed the requirements needed to support the smaller business and will need to be right-sized.
Post completion of the Seeds Sale the market capitalisation of PGW will be materially smaller and accordingly it is to be expected that its
market status may make it less likely to attract analyst coverage and investor interest.
Consequences if Resolution 4 is not approved
If the Resolution 4 is not approved then the Seeds Sale will not proceed and the potential return of capital to shareholders (discussed
above) would not occur.
In that event the Board's priority of maximising value for shareholders will remain, including maximising the value of the PGW’s stake in
PGW Seeds. Further, the Board will continue with the comprehensive strategic review of the PGW business, which may result in similar
transactions being put to shareholders for approval. However, as mentioned above, the Seeds Sale was identified by the Board as the
preferred transaction out of the expressions of interest which the Board has received to date.
Minority Buy Out Rights
If Resolution 4 is passed, and any shareholder that has cast all the votes attached to the shares registered in that shareholder’s name and
having the same beneficial owner, against the resolution, then that shareholder is entitled to require PGW to purchase those shares in
accordance with section 110 of the Companies Act.
If this right is validly exercised by any shareholders, the Companies Act provides for PGW to acquire (or procure the acquisition of )
the relevant shares at a fair and reasonable price as at the close of business on 29 October 2018 (being the day before the date of the
meeting), disregarding any value attributable to the shares from the Seeds Sale.
Shareholders should note that they are entitled to object to the price offered in accordance with the process provided for by the
Companies Act, in which case a fair and reasonable price will be determined by arbitration. These are referred to as “Minority Buy-Out
Rights” for the purpose of this Notice. The Appendix to this Notice sets out the procedure for Minority Buy-out rights. Shareholders who
become entitled to exercise this right are encouraged to first seek independent advice from a financial adviser.
Shareholders should also note that PGW has the ability to terminate the Sale and Purchase Agreement in the event that shareholders
holding, in aggregate, more than 5% of the total number of PGW shares give PGW a valid notice requesting to exercise their Minority Buy-
Out Rights.
Listing Rules requirements - disposal of assets
The Seeds Sale will involve a disposal of assets of PGW in excess of 50% of PGW’s average market capitalisation. Listing Rule 9.1.1 provides
that an issuer such as PGW cannot enter into a transaction involving such a disposal except with the prior approval of shareholders by
ordinary resolution, or by special resolution if a special resolution is required under the Companies Act. As at 8 October 2018, based on
the preceding 20 Business Days Volume Weighted Average Price of shares the transaction represents 89.4% of the market capitalisation
of PGW.
In this case the Companies Act does require approval by special resolution (as discussed on page 4 above).
Accordingly, approval of the Seeds Sale must be by special resolution. This is the special resolution identified as 'Resolution 4' on page 1 of
this Notice of Meeting.

Appendix
NOTICE OF COMBINED SPECIAL AND ANNUAL MEETING | 8
Minority Buy-Out Rights
Section 110 of the Companies Act may confer Minority Buy-Out Rights on shareholders who vote against the resolution.
For a shareholder to exercise those Minority Buy-Out Rights, the shareholder must cast all the votes attached to shares registered in the
shareholder’s name and having the same beneficial owner against the resolution. If the resolution is nevertheless passed, to exercise
Minority Buy-Out Rights such a shareholder must, within 10 working days of the passing of the resolution, give written notice to the
Company that the shareholder requires the Company to purchase the shareholder’s shares.
Within 20 working days of receipt of the notice, the Board must:
(a) agree to purchase the shares; or
(b) arrange for some other person to agree to purchase the shares; or
(c) apply to the Court for an order exempting the Company from purchasing the shares under section 114 or section 115 of the
Companies Act; or
(d) arrange, before the resolution becomes effective, for the resolution to be rescinded by special resolution in accordance with section
106 of the Companies Act or decide in the appropriate manner not to take the action concerned (as the case may be).
Written notice of the Board’s decision must be given to the relevant shareholder(s).
Where the Board agrees to the purchase of the shares by the Company, it must give notice to the relevant shareholder(s), within
5 working days after the notice referred to in the preceding paragraph, setting out the price the Board offers to pay for those shares.
That price must be a fair and reasonable price as at the close of business on the day before the resolution was passed calculated using
a default methodology designed to achieve a pro rata portion of the fair and reasonable value of all shares in the Company adjusted to
exclude any fluctuation in the value of all shares that occurred and that was due to, or in expectation of the Seeds Sale. Because the buy-
out price would not include the value of the Seeds Sale, the Board considers that it would not be in shareholders’ interests for them to
exercise their Minority Buy-Out Rights.
The Board may use a different methodology to calculate the fair and reasonable price if using the default methodology would be clearly
unfair to the shareholder or the Company (and in that case the Board must also state in the notice why calculating the price under the
default methodology would be clearly unfair).
A shareholder may object to the price offered by the Board by giving written notice to the Company no later than 10 working days after
the date the Board gave notice of the price offered by the Board. If, within that 10 working day period, no objection to the price offered
by the Board has been received by the Company, it must, purchase the shares at the nominated price. If within those 10 working days an
objection to the price has been received by the Company, the fair and reasonable price must be submitted to arbitration. The Company
must within 5 working days of receiving the objection pay on a provisional basis a price equal to the price originally nominated by the
Board. The arbitration is to be conducted in accordance with the Arbitration Act 1996. If the price determined by the arbitrator:
(a) exceeds the provisional price paid by the Company, then the arbitrator must order the Company to pay the balance owing to the
shareholder; or
(b) is less than the provisional price paid by the Company, then the arbitrator must order the shareholder to pay the excess to the
Company.
The arbitrator must award interest on any balance payable or excess to be repaid except in exceptional circumstances.
If a balance is owing to the shareholders the arbitrator may award, in addition to or instead of interest, damages for loss attributable to the
shortfall in the initial payment.
If the Board arranges for some other person to agree to purchase the shares, the provisions set out in the preceding paragraphs will
(with all appropriate modifications) apply to the purchase of shares by such person and, in addition, the Company must indemnify the
shareholder in respect of any losses suffered by the shareholder by reason of the failure by the person to purchase the shares at the price
nominated or fixed by arbitration, as the case may be.
NZX Accepts No Responsibility
This Notice of Meeting has been approved by NZX.
However, NZX accepts no responsibility for any statement made in this Notice of Meeting.

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to the relevant Computershare address above. If you want your proxy to vote on the Resolutions on
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entitled “Resolutions” to direct your proxy how to vote on each resolution (for, against or at the
proxy’s discretion).
If you do not give voting directions to your proxy by NOT ticking any box in the Voting Section, your
direction is to abstain from voting on the relevant resolution, unless you appoint the Chairman as
proxy in which case the Chairman will vote in favour of the resolution.
Go online to vote or appoint a proxy, or turn over to complete the form
Signing Instructions for Postal Voting
and Proxy Forms
Individual
Where the holding is in one name, the shareholder must sign.
Joint Holding
Where the holding is in more than one name, all of the
shareholders must sign.
Power of Attorney
If the Proxy Form has been signed under a power of attorney, a
certified copy of the power of attorney (unless already deposited
with the Company) and a signed certificate of non-revocation of
the power of attorney must be produced to the Company with
this Proxy Form.
Companies
This form must be signed by a Director jointly with either
another Director or a Company Secretary, or a Sole Director can
also sign alone. Please sign in the appropriate place and indicate
the office held.

Appoint a Proxy to Vote
on Your Behalf
Postal Voting Form or Proxy Voting
Instructions or Ballot Paper
(if a Poll is called)
Proxy/Representative Form
I/We being a Shareholder (or Shareholders) of PGG Wrightson Limited
hereby appoint of
or failing him/her of
as my proxy or representative to exercise my/our vote at the Special and Annual Meeting of Shareholders of PGG Wrightson Limited
(“Company”) to be held at Riccarton Park (Show Gate Lounge), 165 Racecourse Road, Christchurch on Tuesday, 30 October 2018,
commencing at 9.30am and at any adjournment of that meeting.
Ordinary Resolutions supported by the Board
1. To re-elect Kean Seng U as a Director of the Company
2. To re-elect Lim Siang (Ronald) Seah as a Director of the Company
3. To authorise the Directors to fix the auditor’s remuneration
Proxy
Holder’s
For Against Abstain Discretion
Proxy
Holder’s
For Against Abstain Discretion
Signature of Shareholder(s) This section must be completed.
Shareholder 1 Shareholder 2 Shareholder 3
or Sole Director and Sole Company Secretary or Director or Director/Company Secretary
Contact Name: Contact Daytime Telephone: Date:
ATTENDANCE SLIP
Shareholders are invited to attend the
Special Meeting and 2018 Annual Meeting
of PGG Wrightson Limited at Riccarton Park
(Show Gate Lounge), 165 Racecourse Road,
Christchurch on Tuesday, 30 October 2018,
commencing at 9.30am
•
If you wish to attend, please bring this paper. Separate the bottom section and hand it in at registration.
The Proxy Voting Instructions / Ballot Paper are for use in the event of a ballot at the meeting.
•
If you do not wish to attend and wish to appoint a proxy or representative or vote online, by email, by post or by fax,
please follow the instructions on the reverse on this form.
For your vote to be effective it must be received by 9.30am on Sunday, 28 October 2018.
Please complete this section if you have appointed a proxy or representative and wish to instruct
him / her on voting. Or please complete if you are NOT attending the Special and Annual Meeting
and are NOT appointing a proxy or representative to attend in your place, and you wish to vote by
email, by post or by fax.
(TICK ONE BOX FOR EACH RESOLUTION)
Please complete this section if you are NOT attending the meeting and wish to appoint a proxy or
representative to attend in your place. DO NOT complete this section if you are appointing a proxy
online, or if you are voting online, by email, by post or by fax.
Special Resolution supported by the Board
4.
To approve the sale by PGG Wrightson Limited of all of the shares in PGG
Wrightson Seeds Holdings Limited under an Agreement for the Sale and
Purchase of shares in PGG Wrightson Seeds Holdings Limited dated 4 August
2018 between PGG Wrightson Limited (as seller), DLF Seeds A/S (or its nominee)
(as purchaser) and DLF Seeds A/S (as guarantor), as required by section 129 of
the Companies Act 1993 and rule 9.1.1(b) of the NZX Main Board/Debt Market
Listing Rules.
(TICK ONE BOX)
✁

---

PGG Wrightson Limited
Independent Appraisal Report

October 2018

Page 1

Contents
1 Terms of the Proposed Transaction ............................................................................................................................. 2
1.1 Introduction .......................................................................................................................................................... 2
1.2 The Proposed Transaction ................................................................................................................................... 3
1.3 Shareholder Approval .......................................................................................................................................... 3
1.4 Purpose of the Report .......................................................................................................................................... 4
1.5 Other ..................................................................................................................................................................... 4
2 Executive Summary ....................................................................................................................................................... 5
2.1 The Proposed Transaction ................................................................................................................................... 5
2.2 Valuation of the Seed and Grain Business ......................................................................................................... 5
2.3 Other Factors Relevant to Shareholders ............................................................................................................ 7
2.4 Summary .............................................................................................................................................................. 8
3 Profile of PGG Wrightson .............................................................................................................................................. 9
3.1 Background and History ...................................................................................................................................... 9
3.2 Overview of Business Operations........................................................................................................................ 9
3.3 Seed and Grain .................................................................................................................................................. 10
3.4 Retail and Water ................................................................................................................................................ 14
3.5 Agency ................................................................................................................................................................ 16
3.6 Corporate ............................................................................................................................................................ 19
4 Industry Overview ........................................................................................................................................................ 20
4.1 Global Agricultural Outlook ................................................................................................................................ 20
4.2 New Zealand Agricultural Sector ....................................................................................................................... 23
5 Financial Performance ................................................................................................................................................ 28
5.1 Consolidated Financial Performance ................................................................................................................ 28
5.2 Seed and Grain Financial Performance ............................................................................................................ 29
5.3 Rural Services Financial Performance .............................................................................................................. 30
6 Financial Position ........................................................................................................................................................ 33
6.1 Consolidated Financial Position ........................................................................................................................ 33
6.2 Seed and Grain Financial Position .................................................................................................................... 35
6.3 Rural Services Financial Position ...................................................................................................................... 36
7 Cash Flow .................................................................................................................................................................... 37
7.1 Capital Expenditure ............................................................................................................................................ 37
7.2 Dividends ............................................................................................................................................................ 38
8 Share Ownership and Price History ............................................................................................................................ 39
8.1 PGW Share Register........................................................................................................................................... 39
8.2 Share Price Performance .................................................................................................................................. 40
9 Assessment of the Proposed Transaction ................................................................................................................. 41
9.1 Valuation of the Seed and Grain Business ....................................................................................................... 41
9.2 Other Factors Relevant to Shareholders .......................................................................................................... 48
Appendix 1: Sources of Information .................................................................................................................................... 51
Appendix 2: Qualifications and Declarations ...................................................................................................................... 52
Appendix 3: Valuation Methodologies ................................................................................................................................. 53
Appendix 4: Valuation Evidence .......................................................................................................................................... 54
Appendix 5: Weighted Average Cost of Capital ................................................................................................................... 58
Appendix 6: Glossary of Key Terms and Definitions ........................................................................................................... 59

Page 2

1 Terms of the Proposed Transaction
1.1 Introduction
PGG Wrightson Limited (PGW or the Company) is a New Zealand incorporated company, listed on the NZX Main Board.
PGW, in its current form, was established in October 2005 through the merger of Pyne Gould Guinness and Wrightson.
PGW is New Zealand’s leading provider of agricultural products and services to growers, farmers and processors in New
Zealand, and also operates internationally. The Company’s core operating segments are Seed and Grain, Retail and Water and
Agency:
• Seed and Grain is the largest forage-seed supplier in the Southern Hemisphere and has established operations in New
Zealand, Australia and South America. This business also undertakes grain trading, seed exports and significant research
and development (R&D) activities to develop proprietary seeds best suited to certain temperate growing conditions.
• Retail and Water includes 94 retail stores nationwide that sell a variety of farming and horticulture products to the New
Zealand agricultural sector, from seed to agricultural chemicals and dairy detergent to stock nutrition. PGW’s water
business designs, implements and operates irrigation and pumping systems for predominantly rural customers, as well as
horticulture, golf, landscape and sports turf customers, in New Zealand.
• Agency is a multidisciplinary segment of the Company, with services that include livestock trading, livestock export, wool
brokerage and wool export (provided through Bloch and Behrens) activities. This segment also has rural real estate,
insurance and finance operations.
DLF Seeds A/S (DLF Seeds) is a Denmark-based global seeds group, established in 1872. It is owned by DLF AmbA, a co-
operative owned by approximately 3,000 Danish seed growers. DLF Seeds is active in more than 80 countries worldwide and
operates within forage and turf seed, sugar and fodder beet seed, seed potatoes and multiplication of vegetable seed.
On 6 August 2018, PGW announced that it had entered into an agreement to sell 100% of the shares of PGG Wrightson Seeds
Holdings Limited (PGWSHL) to DLF Seeds (the Proposed Transaction). DLF Seeds would thereby acquire substantially all of the
assets and operations of the Seed and Grain business in New Zealand, Australia, South America and internationally.
After completion adjustments, DLF Seeds has agreed to pay cash consideration of approximately $413 million for 100% of the
equity in the Seed and Grain business and would also assume or repay approximately $21 million of Seed and Grain’s
outstanding net debt as at 30 June 2018.
DLF Seeds has advised us that the key rationale for the Proposed Transaction is to develop complementary geographic
operations in the temperate and cool-climate seeds industries in the Northern and Southern Hemispheres.
The Directors of PGW have appointed KordaMentha to prepare this Appraisal Report (the Report) to inform PGW’s
shareholders. Although the Report is not specifically required under NZX Listing Rules, the Directors have determined that the
Report should be provided to shareholders to assist them to consider the Proposed Transaction. Our appointment has
subsequently been approved by NZX Regulation (NZXR).
The Report is being sent to the shareholders of PGW, together with the Notice of Meeting. Shareholders should read the Notice
of Meeting issued by PGW in conjunction with the Report.
Accepting or rejecting the Proposed Transaction is a matter for individual shareholders based on their own views as to value,
future market conditions, risk profile, liquidity preference, portfolio strategy, tax position and other factors. In particular,
taxation consequences will vary widely across shareholders. Shareholders will need to consider these consequences and, if
appropriate, consult their own professional advisers.

Page 3

1.2 The Proposed Transaction
1.2.1 Summary of key terms
Key terms of the Proposed Transaction are summarised as follows:
• DLF Seeds will purchase 100% of the shares of PGWSHL.
• The proposed cash consideration for the Seed and Grain business is based on an equity value of $413 million. Completion
adjustments have been made to the purchase price, based on how the audited value of net assets actually transferred to
DLF Seeds (measured as at 30 June 2018) compared to a target net assets amount of $201 million.
• There will be an adjustment for interest accrued between 30 June 2018 and the actual settlement date.
• DLF Seeds will assume or repay approximately $21 million of Seed and Grain’s outstanding net debt as at 30 June 2018.
1.2.2 Conditions and features of the Proposed Transaction
The Proposed Transaction is still conditional upon:
• Approval by PGW’s shareholders of a major transaction, in accordance with the Companies Act and NZX Listing Rules.
• Overseas Investment Office (OIO) approval for DLF Seeds’ purchase of PGWSHL’s shares.
• New Zealand Commerce Commission approval, on terms acceptable to DLF Seeds.
• Australian Competition and Consumer Commission approval, on terms acceptable to DLF Seeds.
• Applicable regulatory approvals in South America.
• Change-of-control consents from PGW’s joint-venture partners relating to Grasslands Innovation Limited, Forage
Innovations Limited and Endophyte Innovation.
The Proposed Transaction is subject to a range of other conditions, which are relatively standard in transactions of this type.
These conditions are for the benefit of DLF Seeds and may be waived at its discretion.
Other notable features of the Proposed Transaction include the following:
• PGW and Seed and Grain (under DLF Seeds’ ownership) will enter into a long-term distribution agreement for PGW to
continue to distribute seed and grain products through its New Zealand retail stores.
• PGW will grant a licence to Seed and Grain for the continued use of the PGG Wrightson Seeds brand.
• PGW will continue to provide and recharge at cost a range of corporate functions and shared services to Seed and Grain
for a transitional period of between 12 and 18 months.
1.3 Shareholder Approval
PGW’s shareholders are being asked to consider and, if thought fit, pass a resolution that would allow the Proposed
Transaction to proceed.
The resolution is a special resolution, requiring a majority of 75% of the votes to be in favour of the Proposed Transaction for it
to proceed. A special resolution is required because the Proposed Transaction is a major transaction for the purposes of
Section 129 of the Companies Act, as it involves the disposal of assets valued at more than 50% of PGW’s total asset base.
The Shareholder Meeting to consider the Proposed Transaction is set to be held on 30 October 2018 in Christchurch.
The Directors of PGW unanimously recommend that shareholders vote in favour of the Proposed Transaction at the
Shareholder Meeting. In their view, the Proposed Transaction is in the best interests of PGW and its shareholders.

Page 4

1.4 Purpose of the Report
1.4.1 NZX Listing Rules requirements
The Proposed Transaction between PGW and DLF Seeds is subject to Rule 9.1.1 of the NZX Listing Rules, which states that,
unless approved at a meeting of shareholders, an issuer shall not enter into a transaction to sell assets that would:
• change the essential nature of its business; or
• whereby the gross value of the transaction exceeds 50% of its average market capitalisation.
The Proposed Transaction requires approval by special resolution of shareholders under NZX Listing Rule 9.1.1 because the
proposed consideration for the Seed and Grain business exceeds 50% of PGW’s market capitalisation. There is no specific
requirement for an Appraisal Report in respect of Rule 9.1.1. However, NZX Listing Rule 9.1.2 requires a notice of meeting
containing a resolution to approve any transaction referred to in Rule 9.1.1 to contain, or be accompanied by, such
information, reports, valuations and other materials as are necessary to enable shareholders to appraise the implications of
the transaction. PGW’s Directors have determined that the Report shall be provided to shareholders to assist them to appraise
the implications of the Proposed Transaction.
NZXR has approved KordaMentha’s appointment to provide an Appraisal Report, pursuant to NZX Listing Rule 1.7.1. In our
opinion, the information that has been provided to us for the purposes of preparing the Report, and the information to be
provided by PGW to shareholders that are non-associated shareholders (as given meaning at NZX Listing Rule 1.7.2), is
sufficient to enable the non-associated shareholders to understand all the relevant factors and to make an informed decision
in respect of the Proposed Transaction. We also confirm that there have been no restrictions to our terms of reference that
have impacted our scope of work and the Report.
Under the NZX Listing Rules, the key requirement of an Appraisal Report is to state whether the consideration and terms and
conditions of the Proposed Transaction are “fair” to non-associated PGW shareholders. Although the exact meaning of the
word “fair” is not prescribed in the NZX Listing Rules, it is usually given a relatively narrow definition focusing on the price paid
or received for the assets involved. For this Appraisal Report on the Proposed Transaction to sell the Seed and Grain business
to DLF Seeds, the main focus for PGW’s shareholders is whether the price and terms and conditions offered for the Seed and
Grain business are favourable to PGW. There are no shareholders “associated” with DLF Seeds. Therefore, “non-associated”
shareholders are all of the shareholders of PGW.
1.5 Other
The sources of information, to which we have had access and upon which we have relied, are set out in Appendix 1.
The Report should be read in conjunction with the statements and declarations set out in Appendix 2, regarding our
independence, qualifications, general disclaimer and indemnity and the restrictions upon the use of the Report.
References to ‘$’, dollars or cents are to New Zealand dollars, unless specified otherwise. References to financial years or ‘FY’
mean PGW’s financial year end, 30 June, unless specified otherwise.
Please note, tables may not add due to rounding.

Page 5

2 Executive Summary
This executive summary is a summary only. It should be read in conjunction with the balance of the Report.
2.1 The Proposed Transaction
On 6 August 2018, PGW announced that it had entered into an agreement to sell 100% of the shares of its Seed and Grain
business to DLF Seeds.
After completion adjustments, DLF Seeds has agreed to pay cash consideration of approximately $413 million for 100% of the
equity in the Seed and Grain business and would also assume or repay approximately $21 million of Seed and Grain’s
outstanding net debt as at 30 June 2018.
DLF Seeds has advised us that the key rationale for the Proposed Transaction is to develop complementary geographic
operations in the temperate and cool-climate seeds industries in the Northern and Southern Hemispheres.
The Directors of PGW have appointed KordaMentha to prepare the Report to inform PGW’s shareholders.
In order to assess the Proposed Transaction, we have considered:
• the Proposed Transaction’s price and terms and conditions relative to our assessment of the value of the Seed and Grain
business; and
• other factors relevant to shareholders when assessing the Proposed Transaction.
2.2 Valuation of the Seed and Grain Business
Figure 2.2.1 presents the standalone enterprise value ranges from our capitalisation of earnings and Discounted Cash Flow
(DCF) valuation approaches for the Seed and Grain business.
We have assessed a valuation range for Seed and Grain, on a standalone basis, between $377 million and $441 million with a
midpoint of $409 million.
The effective purchase price offered by DLF Seeds ($434 million, including the debt assumed) sits towards the top end of our
assessed range for Seed and Grain’s enterprise value.
Figure 2.2.1: Standalone valuation summary for Seed and Grain

Source: KordaMentha analysis
320330340350360370380390400410420430440450460470480490500
Capitalisation of Earnings
DCF Valuation
Assessed Range
NZD millions
Effective purchase price

Page 6

As part of the Proposed Transaction, Seed and Grain (under DLF Seeds’ ownership) would enter into distribution, brand and
shared-services agreements with PGW. Our valuation assessment assumes that these arrangements would leave Seed and
Grain in a similar operating and financial position to its current situation.
2.2.1 Capitalisation of earnings valuation
Our capitalisation of earnings valuation results in a standalone enterprise value between $360 million and $441 million.
Key assumptions underlying our capitalisation of earnings valuation approach are summarised below.
• We have selected an earnings multiple range between 10.0x and 10.5x to apply to Seed and Grain’s normalised earnings
before interest, tax, depreciation and amortisation (EBITDA). The selected multiple has been determined after considering:
− 9x EBITDA is the median forecast multiple observed for comparable trading companies. We consider an EBITDA
multiple between 10.0x and 10.5x is more appropriate when the trading multiples are adjusted to include a control
premium and to recognise Seed and Grain’s R&D investment programme, greater proportion of proprietary products
and higher profitability than many of the comparable companies.
− A multiple of 10.0x EBITDA is broadly consistent with the comparable transaction multiples, particularly when outliers
are removed from consideration.
• For valuation purposes, we have assessed Seed and Grain’s normalised EBITDA to lie in a range between $36 million and
$42 million, although note that Seed and Grain’s recent trading results have been at the low end of this range.
− The lower bound of $36 million reflects the EBITDA achieved by Seed and Grain in FY18 and Seed and Grain’s
forecast EBITDA for FY19. $36 million is also the lowest EBITDA result achieved since FY15.
− The high end of $42 million reflects the best EBITDA result achieved by Seed and Grain over the period FY15 to FY18.
$42 million EBITDA is therefore attainable for the business, particularly in years when trading conditions are
favourable for its Australian and South American business units. We note that this earnings level appears optimistic
given Seed and Grain’s recent trading history and projected financial performance.
2.2.2 DCF valuation
Our DCF valuation results in a standalone enterprise value between $377 million and $413 million. To derive this range, we
have relied upon:
• a five-year indicative forecast provided by PGW Management;
• terminal growth in the range of 1.5% to 2.5% per annum; and
• our assessed Weighted Average Cost of Capital (WACC) range of 9.3% to 9.7%.
The DCF valuation is heavily dependent on the terminal value assumptions adopted. More than 75% of Seed and Grain’s
enterprise value is contributed by the terminal value calculation. As a result, the DCF valuation is sensitive to changes that
impact Seed and Grain’s long-term earnings results and margins.
We consider there is some risk around Seed and Grain’s ability to achieve the EBITDA growth and margin expansion projected
by Management, which require all business units to consistently improve over the next five years. Future outcomes are
particularly uncertain for the Australian and South American businesses, which both have a track record of inconsistent
performance due to events outside of PGW Management’s control (e.g. weather conditions).

Page 7

2.3 Other Factors Relevant to Shareholders
2.3.1 Likelihood of the Proposed Transaction being approved
Agria (Singapore) Pte Limited (Agria), as PGW’s largest shareholder, controls 50.2% of PGW’s voting rights. We understand, as
at 30 September 2018, that Agria has not provided an irrevocable undertaking to vote in favour of the Proposed Transaction.
Therefore, it remains to be seen whether Agria will vote for or against the Proposed Transaction.
Given Agria has representatives on the PGW Board, and the PGW Board has unanimously recommended the Proposed
Transaction, it would appear most likely that Agria will vote for the Proposed Transaction.
The Proposed Transaction will not proceed if Agria votes against it at the Shareholder Meeting. Equally, if Agria votes in favour
of the Proposed Transaction but other shareholders that collectively represent more than 17% to 25% of PGW’s voting rights
(depending on voter participation) reject it, the Proposed Transaction will not proceed.
2.3.2 Rural Services
If the Proposed Transaction proceeds, PGW shareholders will retain their shareholdings in the remaining PGW business.
Excluding Seed and Grain, PGW’s remaining operations are the Retail and Water, Agency and Corporate segments of the
business (Rural Services). Rural Services will be a materially smaller business than PGW in its current form. The business will
be less diversified operationally and geographically, given that its operations will be entirely based in New Zealand. There is a
risk that the cost overheads and corporate structure will exceed the requirements needed to support the smaller business. We
understand that PGW Management will review the head office and governance costs, should the Proposed Transaction
proceed.
Post completion of the Proposed Transaction and completion of a capital return, PGW’s market capitalisation would be
materially lower than currently. Accordingly, PGW is less likely to attract analyst coverage and investor interest, and its shares
are likely to trade with reduced liquidity.
The Rural Services business is projecting relatively steady financial performance between FY18 and FY19. Key points to note in
connection with the expected financial performance of Rural Services include:
• Retail and Water achieved a record EBITDA of $23.8 million in FY18, as Retail’s and Water’s contributions both improved
on the previous year. Management expects modest earnings growth to be achieved in FY19, through the continued
expansion of Retail’s key product lines and via Water’s broader service offering.
• Agency delivered a record EBITDA of $20.1 million in FY18. However, New Zealand’s rural real estate market softened
during FY18, which made trading conditions difficult for the Real Estate unit. Management has forecast lower earnings for
the Agency segment in FY19.
• We understand that PGW Management will review the appropriate structure of Rural Services, should the Proposed
Transaction proceed, with the objective of reducing costs to the extent possible to reflect the new business.
Following the Proposed Transaction, PGW may potentially make a tax-free cash distribution to shareholders of up to $292
million of available subscribed capital (subject to a favourable binding ruling from the Inland Revenue Department (IRD)) and
use the remaining proceeds from the divestment to pay down debt. The final composition of Rural Services’ balance sheet will
not be known until PGW determines the quantum of funds to be returned to shareholders and utilised to pay down debt.
However, it would appear likely that the balance sheet will be de-risked to some degree with materially lower levels of debt
than currently in place for PGW.
PGW has announced that in addition to the Seed and Grain divestment, the PGW Board is continuing with a strategic review to
explore options for Rural Services.

Page 8

2.3.3 If the Proposed Transaction does not proceed
If the Proposed Transaction does not occur, PGW shareholders will retain their shareholdings in the PGW business, which
would include Seed and Grain.
The status quo leaves PGW as a diversified rural-servicing business and its prospects are largely unchanged from the position
it was in prior to the announcement of the Proposed Transaction. Those prospects include relatively consistent levels of
profitability and manageable debt levels.
If the Proposed Transaction does not proceed, in the absence of any other factors, we consider that PGW’s share price may
well recede from levels observed following the announcement of the Proposed Transaction, unless an alternative transaction
were to eventuate. It is likely that the current share price observed for PGW has been affected by the control premium that is
expected to be achieved from divesting the Seed and Grain segment.
PGW has been undertaking a strategic review throughout 2018. The Directors of PGW appointed Australasian and global
investment banks to canvass interest for various transactions involving the sale of all or part of PGW’s business. It is likely that
any superior alternative transaction that could eventuate to acquire PGW would have presented itself during that process.
There is always potential for a superior alternative transaction to eventuate, although in these circumstances that would
appear less likely.
2.4 Summary
In our opinion, the consideration and terms and conditions of the Proposed Transaction are fair to PGW’s non-associated
shareholders.
We note that each shareholder’s circumstances and investment objectives will be unique. It is therefore not possible to
prescribe or advise what action an individual should take in respect to the Proposed Transaction. Our advice is necessarily
general in nature and is intended to assist each shareholder to form their own opinion as to what action they should take given
their specific circumstances.

Page 9

3 Profile of PGG Wrightson
3.1 Background and History
PGW has a long history by New Zealand standards, with its legacy companies having worked alongside New Zealand farmers to
service their on-farm needs for more than 175 years.
PGW, in its current form, was established in October 2005 through the merger of Pyne Gould Guinness and Wrightson. Both
founding companies have long histories dating back to 1851 and 1841 respectively, and were themselves the result of many
amalgamations and mergers of smaller, more regional-focused, rural-servicing businesses.
PGW is domiciled in New Zealand and listed on the NZX Main Board. The Company employs approximately 3,000 people, who
are located throughout New Zealand as well as in key regions of Australia and parts of South America.
3.2 Overview of Business Operations
PGW sells a wide range of products and services to the agricultural sector in New Zealand and internationally. The Company is
deeply embedded within New Zealand, given its long-term brand presence and breadth and scale of operations.
PGW provides key inputs and offers services throughout the agricultural production cycle in New Zealand, as is illustrated by
Figure 3.2 below.
Figure 3.2: PGW’s presence throughout the supply chain

Source: PGW Management
National market coverage
On-Farm Supply Chain (NZ)Post-Farm Supply Chain
LandFeedAnimalsHarvestSalesProcessing
Salesand
Marketing
Real
Estate
Water
Seed and Grain
(Processing and distribution of seed/grain)
Seed and
Grain
Livestock
Wool
Bloch and
Behrens
Finance and Insurance
Farmers have multiple interactions with PGW, from initial
purchase of land through to sale of farm outputs
Rural Supplies and FruitfedSupplies

Page 10

3.3 Seed and Grain
Seed and Grain produces approximately 65 species of seeds and around 403 varieties via third-party farmers. The business is
the global leader in the $2 billion temperate forage-seeds market, trading in New Zealand under both the PGG Wrightson
Seeds and Agricom brands. Forage seeds are used for animal grazing. Seed and Grain, in conjunction with its research
partners, undertakes substantial research activities to develop proprietary seeds and enhance farm production and
profitability. The intellectual-property (IP) rights are held within joint ventures between Seed and Grain and its research
partners.
PGW’s Seed and Grain business units maintain a market share of between 40% and 60% across New Zealand, Australia and
South America.
Table 3.3a: Share of key trading markets
Business Unit FY18 EBITDA Key Market Market Position
Seed and Grain
New Zealand
$31m
Proprietary forage
seed
#1
Seed and Grain
Australia
$2m
Domestic proprietary
forage seed
#1
Seed and Grain
South America
$4m Uruguay pasture seed #1
Source: PGW Management
The R&D investment programme is focused on the development of new proprietary forage and turf products for PGW’s major
markets, being New Zealand and the temperate regions of Australia, USA, South America, Europe and South Africa. With its
established R&D function, Seed and Grain is well positioned to expand into adjacent markets, particularly tropical seeds which
is considered a major opportunity by Management. Tropical seeds are produced in regions with typically warm climates.
Seed and Grain also operates grain-trading and brokerage services within New Zealand, researches, produces and sells turf
seed and associated non-seed turf products, and exports a variety of products to more than 45 countries annually.
Seed and Grain is the segment that employs the largest amount of capital and generates PGW’s highest level of earnings. Key
external factors affecting financial performance include farmgate milk and livestock prices, farmer confidence, weather
conditions, global prices for seed and grain commodities, and foreign exchange rates.
Table 3.3b below summarises the current status of Seed and Grain’s operations across its key markets. The relative revenue
contributions made by each Seed and Grain business unit are presented in Figure 3.3, which follows.
Table 3.3b: Status of operations
Market Status
New Zealand Established and market-leading position
Australia Strong market share in key niche products
South America
• Uruguay
• Argentina
• Brazil

• Established market position and early-stage market development
• Relatively new entrant in the market
• Relatively new entrant in the market
Tropical Seeds A major opportunity in the future
Source: PGW Management

Page 11

Figure 3.3: FY18 revenue contributions*

* Seed and Grain Research / Corporate has been excluded
Source: PGW Management
3.3.1 New Zealand
New Zealand has a sophisticated farming market and the forage seeds produced here are highly proprietised. Proprietary
seeds are the product of R&D programmes and are protected by IP rights.
Seed and Grain New Zealand has developed and maintains a strong portfolio of IP, which supports its proprietary-seed offering.
Seed and Grain produces the leading varieties of forage seeds in New Zealand, as measured by the DairyNZ Forage Value
Index, and has an approximate 60% share of the NZ forage-seeds market.
Seed and Grain’s market-leading proprietary technology, and the advanced nature of New Zealand’s market, enable the
business to generate high margins and ensure it is well positioned to expand as global forage-seed markets grow (both in
terms of volume and the degree of proprietisation).
Figure 3.3.1 below shows that New Zealand’s consumption of proprietised seeds is significantly higher than in other countries
where PGW operates.
Figure 3.3.1: Composition of forage-seed markets

Source: PGW Management

58%
17%
25%
New ZealandAustraliaSouth America
4%
50%
55%
50%
95%
20%
40%
45%
50%
5%
70%
9%
6%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
NZAustraliaUruguayArgentinaBrazil
Portion of forage seed market
CommodityProprietaryProprietary and TechnologyAdded-Value Technology

Page 12

In addition to forage-seed activities, Seed and Grain New Zealand has operations focused on seed exports, grain trading and
the sale of turf products. The four key business areas are summarised in Table 3.3.1 below.
New Zealand products are distributed via PGW’s Rural Supplies stores, as well as through Farmlands, Farm Source, a range of
smaller retailers and an exclusive relationship with Landcorp.
Table 3.3.1: Operations of Seed and Grain New Zealand
Seed and Grain NZ Description Est. Market Size
NZ Forage Seeds
The NZ Forage Seeds unit sells forage seeds
for animal grazing. This business unit has
seven seed-processing operations and three
distribution centres in New Zealand. 85% of
sales are of proprietary seeds.
$120m
International
The International business unit exports
proprietary seeds to countries outside of New
Zealand, Australia and South America where
PGW does not have a physical presence, such
as South Africa, Europe and USA.
$90m
Grain
Primary activities of the Grain business unit
include:
• sales of proprietary cultivar planting
seeds;
• maize trading, drying, processing and
storage;
• cereal trading – wheat, barley, oats, peas
and beans; and
• wheat and barley research and new
variety development.
$300m
NZ Turf
NZ Turf sells grass seed and non-turf products
for use by stadiums, golf courses, sports clubs
and councils.
$20m
Source: PGW Management
3.3.2 Australia
Seed and Grain Australia is evolving to increase the uptake of proprietary products and diversifying into adjacent market
segments.
Seed and Grain Australia has broadened its product offering through strategic acquisitions of various businesses in Victoria,
Queensland and New South Wales. These acquisitions have given Seed and Grain Australia access to tropical, cereal and
export markets, and have made the Australian business more resilient to volatile weather conditions.
In Australia, opportunities exist for greater product proprietisation. The proprietisation level is approximately 50% at present,
compared to 96% in the New Zealand market. Seed and Grain Australia is building a pipeline of proprietary Australian
products, which is expected to provide a platform for growth. Notably, the investment in Australian R&D operations has
introduced greater product specialisation and diversification.
Seed and Grain Australia now sells forage, cereal and turf products, with sales largely driven by autumn pasture renewals. The
business has a strong presence in the temperate-pasture zones of Australia and has opportunities to grow in the tropical-
pasture zones and export markets. The main exports from Australia are Alfalfa (also known as Lucerne) to the Middle East and
South America, supported by exports to Europe, North Africa and Asia.

Page 13

Management estimates the total size of Australia’s market to be A$245 million. Seed and Grain Australia’s revenue was $76
million (A$70 million) in FY18.
3.3.3 South America
Seed and Grain has invested to establish a presence in South America, which serves as a platform for future growth and an
opportunity to leverage proprietary technology and IP. South America also presents Seed and Grain with a chance to expand
into the tropical-seeds market in the future.
The South American business sells a mix of pasture seed, crop seed, chemicals and other farm inputs and solutions via several
channels (wholesale, partnerships and direct).
To date, the business has primarily operated in Uruguay. Significant investment has been made to set up core infrastructure in
this market and full-service capabilities have been achieved via 50% shareholdings in Agimol Corporation S.A. (AgroCentro)
and Fertimas S.A. (Fertimas). The infrastructure established in Uruguay can now support ongoing sales of forage-seed products
in the country. Uruguay operations, including AgroCentro and Fertimas, contributed approximately 92% of the business unit’s
FY18 revenue.
The South American business has also set up offices and branches in Argentina and Brazil. These are early-stage operations
but together contributed approximately 8% to the business unit’s FY18 revenue.
The financial performance of Seed and Grain in South America was negatively impacted by a fall in commodity prices in 2015
and severe flooding in 2016. These events have led to liquidity issues in Uruguay’s rural sector, which AgroCentro has the
greatest exposure to given its retail focus. Wholesale operations undertaken through subsidiary, Wrightson Pas S.A., deal with
larger commercial entities and have been less affected. The South American business also performed below Management’s
expectations in FY18 due to difficult climatic conditions.
The business unit’s historical and forecast financial performance is summarised in Figure 3.3.3.
Figure 3.3.3: Revenue and EBITDA profile

Source: PGW Management
3.3.4 Research
Management estimates that Seed and Grain has the world’s largest R&D investment programme for pasture seed. As such, it
has a pipeline of new proprietary products under development. Ongoing investment in proprietary-product innovation helps to
increase farm production and profitability, and delivers higher margins for Seed and Grain.
Figure 3.3.4 illustrates how Seed and Grain’s R&D pipeline translates into commercialised products.
–
1
2
3
4
5
6
7
8
9
–
20
40
60
80
100
120
140
160
FY14AFY15AFY16AFY17AFY18AFY19F
EBITDA NZD millions
Revenue NZD millions
South America Revenue (LHS)South America EBITDA (RHS)

Page 14

Figure 3.3.4: R&D pipeline and product development process

Source: PGW Management
Seed and Grain has R&D capability within New Zealand, Australia and South America, including through investments in joint-
venture companies, Grasslands Innovation Limited, Forage Innovations Limited and Endophyte Innovation.
The business also partners with external research organisations to further leverage its capabilities and resources. These R&D
relationships span across nine different countries.
All of Seed and Grain’s R&D activities are coordinated from New Zealand but tend to have a regional focus.
3.4 Retail and Water
PGW operates the largest retail network for the New Zealand rural sector, with 94 stores and approximately 679 staff servicing
over 46,000 B2B customers nationwide. The core product range encompasses essential agricultural and horticultural inputs
and supports non-discretionary farmer/grower spend. The retail network operates under two store brands, Rural Supplies and
Fruitfed Supplies.
The Retail business unit also operates a wholesale business, Agritrade, which supplies both PGW stores and external retailers
such as Farm Source and Farmlands.
The Water business unit became part of the Retail and Water segment in late 2016. This unit specialises in the design and
construction of broad-acre and pastoral irrigation systems, commercial watering systems, the sale of irrigation componentry
and the servicing of existing irrigation schemes.
The Retail and Water segment accounts for approximately 30% of PGW’s EBITDA. Key drivers of financial performance include
farmgate milk prices and discretionary farm spending, livestock prices, global demand for New Zealand’s horticultural exports
and climatic conditions. PGW’s water business is also impacted by government policy regarding water usage and irrigation
schemes.
3.4.1 Retail
PGW’s retail network supplies a wide variety of products to many different areas of the primary sector. Each industry has
different underlying drivers, which provides diversification benefits for the business.
The operations of Rural Supplies, Fruitfed Supplies and Agritrade are summarised in Table 3.4.1.

Stage 1: Plant BreedingStage 2: Product DevelopmentStage 3: High Grade Seed Production
Gate 1Gate 2
R&D pipeline and stage-gate process ensures strict quality controls and high-quality products are commercialised

Page 15

Table 3.4.1: Retail operations
Retail Network Description
Rural Supplies
Rural Supplies is a network of retail stores, which supplies farm products to sheep and
beef (46% revenue), dairy (39% revenue) and arable and other farmers (15% revenue).
These stores also distribute Seed and Grain’s products to customers.
Rural Supplies has 160 technical field reps who work with the technical team to help
improve production and crop yields and provide other on-farm technical advice.
Fruitfed Supplies
Fruitfed Supplies also has a network of retail stores, which supplies products to
horticulture (65% revenue) and viticulture (35% revenue) customers. This business is the
largest provider to New Zealand’s horticulture and viticulture industries.
Fruitfed Supplies’ technical team helps growers to maximise opportunities to sell crops
profitably via a range of advisory services relating to crop production, quality and yields.
Agritrade
Agritrade wholesales and distributes a range of agricultural chemicals, animal health and
other rural products to PGW stores and to other retailers. Several products are distributed
under exclusivity arrangements.
PGW has a strategy to expand Agritrade and significant growth has been achieved since
2012. PGW is focused on broadening the Agritrade product range to achieve continued
sales growth and improvements in gross product margin.
Source: PGW Management
The Retail business unit operates across a number of product categories, including agricultural chemicals, seed and grain,
fertiliser, fencing, stockfood, animal health and general merchandising.
The Retail unit is currently undergoing a systems transformation project, focused on replacing the current in-store POS systems
and integrating a logistics solution (Project RoBuST).
Phase one of an integrated e-commerce platform and CRM tool is currently being developed. Implementation of phase one
remains on track for completion in October 2018 at an estimated cost of $7.8m. The platform will complement existing on-
farm sales representatives and will improve engagement with farmers through increased relationship touch points and data
analytics. This is expected to increase basket sizes and drive sales growth.
3.4.2 Water
The Water business unit was adversely impacted in FY17. The core business of pivot irrigation installations underperformed in
response to a weak payout to dairy farmers, and due to uncertainty surrounding changes to government policy regarding
irrigation schemes.
The Water unit has been restructured in an attempt to realise synergies with Retail and turn around performance. The business
unit now leverages the expertise of PGW’s retail sales network and the relationships of its sales representatives.
The financial performance of the Water business unit improved in FY18, although an EBITDA loss was still recognised for the
period. Further improvement is projected for FY19.

Page 16

Figure 3.4.2: Water business unit sales

Source: PGW Management
PGW is also focused on diversifying the services of the Water business unit to drive growth and insulate earnings from dairy-
industry economics and government-policy risks. Demand for new irrigation schemes is unpredictable in nature and therefore
diversification may help to provide a more stable earnings base for this business unit. A strategic initiative is in place to
undertake more activity in the non-dairy market, as well as in systems servicing and precision water technology.
Further details on New Zealand’s dairy industry, and the government’s irrigation policy, are provided in the Industry Overview
section of the Report.
3.5 Agency
The Agency segment comprises business units that earn income from transaction commissions, being Livestock, Wool, Real
Estate, Insurance and Finance. The Livestock and Wool business units collectively accounted for over 90% of Agency’s EBITDA
in FY18.
Key drivers of financial performance include livestock and wool prices, transaction volumes and commission rates.
3.5.1 Livestock
The Agency segment operates the largest stock-trading business in New Zealand.
The Livestock business unit is supported by a nationwide network of agents and saleyards, with 219 specialist agents across
New Zealand. The core business is focused on sheep and beef, but there is an increasing focus on expanding market share in
dairy stock.
PGW also has the leading share of the deer-velvet market, brokering 35% of New Zealand trades.
The key sales channels for PGW’s Livestock business include Auction, Private Sales and Prime, as outlined in Table 3.5.1
below. The Auction sales channel contributes over half of the total Livestock commission.

45
61
80
55
37
41
45
–
10
20
30
40
50
60
70
80
90
FY13AFY14AFY15AFY16AFY17AFY18AFY19F
NZD millions

Page 17

Table 3.5.1: Livestock sales channels
Sales Channel Description
Auction
The Livestock business unit brokers transactions by auction through
either saleyards or on farm.
For auction sales, the average commission income is around 5%.
Private Sales
The Livestock unit also brokers transactions through directly
matching vendors and purchasers.
The average commission income is approximately 4% for private
sales.
Prime
This involves the procurement of prime livestock on behalf of meat
processors.
PGW earns an average income of $2 per animal through this
channel.
Source: PGW Management
The Livestock business unit launched ‘Go Livestock’ in late 2015, offering grazing contracts to farmers for sheep and cattle.
PGW earns fee income for stock traded using the Go Livestock products and retains exclusive rights to act as an agent for the
sale or purchase of stock. To date, approximately 50% of product uptake has been from farmers who did not previously use the
Livestock unit’s services.
Investments are also being made in developing an online-trading platform for livestock known as bidr®, which will be the first
of its kind in New Zealand. Implementation of the platform is anticipated in early 2019, with further enhancements planned for
an expanded livestock offering, sale of wool and possibly feed requiring additional investment. Historically, the Livestock unit
has relied on a network of saleyards to facilitate trades.
3.5.2 Wool
PGW is a wool exporter and New Zealand’s leading wool broker, with a nationwide network of agents and stores.
The Wool business unit offers a range of services to its clients including Brokerage, Logistics and Export, as outlined in Table
3.5.2 below. Brokerage is the largest service and is a leading part of this business unit.
Table 3.5.2: Wool services
Service Description
Brokerage
The Wool business unit provides brokerage services for New Zealand
growers, primarily by auction. Services include the sampling, testing
and display of wool.
Logistics
The Wool unit handles the receipt, storage, assembly of
consignments and despatch of wool from company-operated bulk
stores. Services are provided externally to Merino NZ and Alliance.
Export
The Wool business is also responsible for the selection and
procurement of wool to achieve customer specifications. Services
include arranging, scouring and international shipping to ports.
Export activities are operated through Bloch and Behrens, with
supplies made to local mills and more than 30 countries worldwide.
Source: PGW Management

Page 18

The Wool unit has experienced challenges over recent years due to a decline in crossbred wool prices and reduced sales
volumes. Financial performance improved in FY18, as volumes increased in response to a recovery in wool prices.
Agency’s online-trading platform (currently under development) could incorporate functionality to support wool sales and the
certification process required for wool broking.
3.5.3 Real estate
PGW’s Real Estate unit is one of New Zealand’s largest, full-service real estate companies with a rural focus. There are 37
offices nationwide and a sales team of over 150 agents.
Commission rates of between 2% and 3% are earned on the sale of rural, lifestyle and residential property. Approximately 50%
of revenue is generated from the sale of properties categorised as rural (i.e. commercial farms and horticultural properties).
PGW maintains a leading position in the rural real estate market.
New Zealand’s rural real estate market has softened since mid-2017 and this trend continues. 1,466 farms were sold in the
12 months to August 2018, down 14% on the year prior. The median price per hectare for all farms sold in the three months to
August 2018 was $19,792 compared to $27,928 recorded for the same period in 2017 (a 29% decrease)
1
.
3.5.4 Insurance and finance
These two business units earn commission from legacy operations, which have been divested. Earnings are forecast to decline
gradually as customers churn to other providers for these services.
The Insurance unit earns commission from AON Insurance for customer referrals. This arrangement was established following
the sale of PGW’s insurance broking business to AON Insurance in 2004.
Finance commissions are received from Heartland Bank for customer referrals. PGG Wrightson Finance was sold to Heartland
Bank in August 2011.


1
REINZ Rural Press Release (24 September 2018)

Page 19

3.6 Corporate
PGW’s corporate function provides shared services to its operating segments including IT, Finance, Human Resources, Legal
and Regional Administration support.
Corporate also manages PGW’s governance requirements, related to areas such as Risk and Assurance, Tax and Corporate
Accounting, and Health and Safety.
Table 3.6: Corporate functions and overheads
FY18 Allocations # FTEs
FY18 Overheads
($m)
Shared Services
Business Operations 41 4.2
Human Resources 16 3.3
Information Technology 50 9.5
Corporate Operations 8 0.8
Regional Administration 22 3.6
Legal 2 0.3
Governance / Head Office* 28 8.8
Total 165 30.5
* FTE figure excludes PGW Board of Directors
Source: PGW Management
A breakdown of how the services and overheads relate to PGW’s business segments is set out in Figure 3.6.
Figure 3.6: Corporate overheads allocation

Source: PGW Management

37%
20%
12%
31%
Retail and WaterAgencySeed and GrainCorporate

Page 20

4 Industry Overview
4.1 Global Agricultural Outlook
The comments in this section have been sourced from the OECD-FAO Agricultural Outlook 2018-2027.
PGW’s business is significantly influenced by global changes to agricultural commodity markets, and can also be affected by
unfavourable weather conditions amongst other factors.
Conditions in world agricultural markets are very different today compared to the last decade. Production has grown strongly
across commodities and in 2017, reached record levels for most cereals, meat products, dairy products and fish. This has
coincided with slower demand growth for commodities and consequently, prices of agricultural products are expected to be low
for the foreseeable future.
4.1.1 Demand
Agricultural commodities are primarily consumed as food, feed and fuel. Food demand is influenced by population and income
growth, and also by dietary patterns and consumer preferences. Demand for animal feed is closely linked to the human
consumption of livestock products, such as meat, eggs and milk. Industrial uses of agricultural commodities (mostly as fuel)
are influenced by general economic conditions, as well as government policy and technological advances.
Over the last decade, global demand has increased significantly for a wide range of agricultural commodities. Much of the
demand growth has been led by rising per capita incomes in China, which stimulated the country’s demand for meat, fish and
animal feed. This source of demand growth is decelerating.
Weaker demand growth is expected to persist over the coming decade. Population will be the primary driver of consumption for
most agricultural commodities, although the rate of global population growth is forecast to decline. Furthermore, per capita
consumption of many commodities is expected to remain flat at a global level.
For cereals and oilseeds, future demand growth will be sourced from feed products, closely followed by food. A large share of
incremental feed demand will come from China. Feed demand growth is nevertheless projected to slow on a global level.
Demand growth for meat products is slowing due to regional variability in preferences and constraints to disposable incomes.
Conversely, demand for fresh dairy products is expected to grow at a faster rate over the next decade. This is largely due to
greater consumption in developing countries.
Vegetable oil was the fastest-growing commodity over the past decade, as biofuel policies, industrial uses and food use
supported demand. Demand growth is expected to slow for vegetable oil but will remain strong compared to other products.
Figure 4.1.1: Growth in annual demand for key commodities

Source: OECD FAO data
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
4.0%
4.5%
5.0%
2008-172018-272008-172018-272008-172018-272008-172018-27
CerealsMeatFresh DairyVegetable Oil
Annual average growth rate
Due to population growthDue to per capita demand growth (food and other uses)

Page 21

4.1.2 Production
During the last decade, robust demand and high agricultural prices led to strong production growth across commodities. Global
agricultural production is projected to grow more slowly in the coming decade.
Global agricultural production is projected to grow by around 20% between 2018 and 2027, but with considerable variability
across regions. Strong growth is expected in Sub-Saharan Africa, South and East Asia and the Middle East and North Africa. By
contrast, production growth in the developed world is expected to be lower, especially in Western Europe where productivity is
already high and the availability of resources is limited.
The growth in production is expected to be achieved from intensification and efficiency gains, and partially from an
enlargement of the production base through herd expansion and the conversion of pasture to cropland.
Figure 4.1.2: Net value of agricultural production

Source: OECD FAO data
4.1.3 Pricing
Real food prices, as measured by the Food and Agriculture Organisation of the United Nations (FAO), can be used to assess the
forecast price path of agricultural commodities and therefore farm decisions affecting demand for on-farm inputs.
Real food prices were relatively high between 2007 and 2014 compared to depressed levels in the late 1990’s and early
2000’s.
Weaker demand growth, strong production growth and high stock levels have caused prices to fall in recent years. Similar
supply and demand dynamics are cited by the FAO as key reasons for real prices being expected to remain constrained
between 2018 and 2027.
Figure 4.1.3a below highlights the global trend in real food prices and their cyclical nature.






–
200
400
600
800
1,000
1,200
1,400
1,600
1,800
Sub-Saharan
Africa
South and East
Asia
Middle East
and North
Africa
AmericasEastern
Europe and
Central Asia
OceaniaWestern
Europe
USD billions
2015-172027

Page 22

Figure 4.1.3a: FAO Food Price Index (real)


Source: OECD FAO data
Figure 4.1.3b shows the FAO’s projections of real price changes over the next decade, per agricultural commodity.
Projected trends for dairy products stand out. Real prices for butter are forecast to decline by 2% per annum, following the
“butter bubble” in 2017. Conversely, skim milk powder and whole milk powder prices are expected to increase.
Despite the FAO forecasting prices to trend downwards, short-term volatility may result in significant deviations from the trend.
We also note that the index is predominantly based in United States dollars, so prices in New Zealand dollars could be
materially different depending on exchange rates.

Figure 4.1.3b: Real price changes for agricultural commodities

Source: OECD FAO data
(3.0%)
(2.5%)
(2.0%)
(1.5%)
(1.0%)
(0.5%)
–
0.5%
1.0%
1.5%
2.0%
Wheat
Maize
Other coarse grains
Rice
Soybean
Other oilseeds
Vegetable oils
Protein meals
White sugar
Raw sugar
Poultry
Pork
Beef
Sheep
Butter
Cheese
Skim milk powder
Whole milk powder
Fish
Ethanol
Biodiesel
Cotton
CerealsOilseedsSugarMeatDairyBiofuels
% change
Forecast
80
100
120
140
160
180
200
Index
FAO Food Price Index (real)1990-97 avge.1998-2006 avge.2007-2014 avge.2015-2027 avge.

Page 23

4.2 New Zealand Agricultural Sector
PGW’s business depends on farm profitability and the general prospects of the rural sector, particularly in New Zealand.
New Zealand’s agricultural sector can be can be divided into three key parts:
• On farm – businesses that utilise an area of land to grow crops and rear animals. These businesses are subject to
volatility in weather and other environmental issues, which can affect production outputs.
• Rural servicing – businesses that provide goods and support services to farms.
• Processing – value-add processors that process the outputs of farms and produce foods for retail or wholesale customers.
PGW operates as a rural-servicing business and benefits from being a market leader in this area of the sector (refer to Table
3.3a). For product supplies, PGW’s key competitors in New Zealand are Farm Source, Farmlands and to a lesser extent,
Ruralco:
• Farm Source is an initiative started by Fonterra to connect the co-operative to its 11,000 farmer suppliers.
• Farmlands is the largest rural-supplies farmer co-operative in New Zealand with a network of over 80 stores.
• Ruralco is a business 100% owned by the Ashburton Trading Society (ATS) rural-supplies co-operative.
For seed and grain production, PGW’s key competitor is Barenbrug, a global seed business headquartered in the Netherlands
that trades as Agriseeds in New Zealand and as Heritage in Australia.
Figure 4.2: Landscape of New Zealand agricultural sector

Source: Statistics New Zealand and PGW Management
Dairy
Meat
Fonterra
Synlait
a2 Milk
Danone
Open Country Dairy
Westland
Tatua
Miraka
Oceania Dairy
Yashili
Silver Fern Farms
Alliance
AFFCO
ANZCO
Dairy
Sheep and Beef
Horticulture
Cropping
12,000+ farms
2.4m ha
6.5m cattle
1.7b milk solids
26,000+ farms
9.6m ha
3.5m cattle
28m sheep
7,500+ farms
0.2m ha
3,000+ farms
0.12 hectares
Supply companies
Fertiliser
Genetics
Major input
producers/suppliers
PGG Wrightson
Farm Source
Farmlands
Ruralco(ATS)
Horticentre
Ballance Agri-Nutrients
Ravensdown
Livestock Improvement
(LIC)
Corteva(chemicals)
Syngenta(chemicals)
Bayer(chemicals)
Nufarm(chemicals)
PGG Wrightson(seed)
Barenbrug(seed)
GeneticTechnology
(seed)
Agrifeeds(feed)
On farmRural servicingProcessing

Page 24

4.2.1 New Zealand agricultural revenue
The agricultural sector is a critical component of the New Zealand economy. It is the largest source of export revenue,
accounting for approximately 40% of total New Zealand export revenue and contributes 4% of New Zealand’s GDP
2
. However,
agriculture’s contribution to GDP has declined since the late 1990’s, due to diversification of the New Zealand economy and
the expansion of its services sector.
Figure 4.2.1a: Agricultural sector contribution to GDP

Source: Statistics New Zealand
Dairy is the largest, fastest-growing and most price-sensitive contributor to the New Zealand agricultural sector. New Zealand is
the largest dairy exporter in the world, accounting for approximately 3% of the world’s total milk production. Approximately 95%
of New Zealand milk production is exported to other countries
3
.
Dairy is forecast to remain the strongest growing part of the New Zealand agricultural sector, in line with global trends. Dairy
has accounted for between 36% and 56% of gross agricultural revenues over the past decade and therefore, New Zealand’s
agricultural sector will benefit from continued growth in global demand for dairy products
4
.
Figure 4.2.1b: Agricultural sector gross revenue

Source: Statistics New Zealand

2

4
Statistics New Zealand: www.stats.govt.nz
3
Fonterra: www.fonterra.com

3.0%
3.5%
4.0%
4.5%
5.0%
5.5%
6.0%
6.5%
7.0%
Percentage of GDP
0%
10%
20%
30%
40%
50%
60%
–
5,000
10,000
15,000
20,000
25,000
30,000
2007200820092010201120122013201420152016
NZD millions
Dairy ProductsCattleSheep
Crops and SeedsWoolOther
HorticultureDairy as % of Total (RHS)

Page 25

4.2.2 Fonterra farmgate milk price
Fonterra’s farmgate milk price is paid to the vast majority of New Zealand dairy farmers as compensation for the supply of raw
milk. This is a key driver of performance in the dairy industry and indicator of the health of New Zealand’s rural sector.
New Zealand is unique in that 95% of processed milk products are exported offshore and Fonterra collects a large proportion
of the raw milk supplied by farmers. There is no market price set through competition for supply, but Fonterra calculates a
farmgate milk price using a regulated methodology
5
.
Global dairy prices declined throughout 2014 to 2016, reflecting a surplus of product supply and weak demand, particularly
from China and Russia. New Zealand dairy farmers faced significant challenges during this period, as farmgate milk prices
were reduced to levels below the cost of production for many farms.
Fonterra increased its forecast farmgate milk price in both the 2016/17 and 2017/18 seasons, in response to a recovery in
global dairy prices. The price is forecast to increase to $6.75 per kilogram of milk solids (kgMS) in the 2018/19 season, which
should ensure most New Zealand dairy farms achieve profitability.
A history of Fonterra’s farmgate milk price is set out in Figure 4.2.2 below.
Figure 4.2.2: Fonterra farmgate milk price

Source: Fonterra
4.2.3 Livestock prices
Livestock prices are another key factor affecting farm profitability and therefore PGW’s financial performance.
Livestock prices have increased across New Zealand in recent years, due to strong demand for beef and sheep meat products
and lower livestock numbers. Export demand is particularly strong in the current market, with annual beef and lamb exports
both expected to surpass $3 billion for the first time in the 2017/18 season ended September. Beef and lamb exports are
both projected to exceed $3 billion again in the 2018/19 season
6
.
Beef + Lamb New Zealand has estimated the average farmgate price for finished lamb at $7.08 per kg, or $131 per head, for
the 2017/18 season. The forecast at the beginning of the season was $5.55 per kg. The average farmgate price for cattle is
estimated at $4.91 per kg for the 2017/18 season, down approximately 0.8% on the previous year.
Beef + Lamb New Zealand has estimated farm profit before tax at $133,400 for all classes of sheep and beef farms in the
2017/18 season. This is 58% higher than forecasts published in their New Season Outlook 2017-18 report. Farm profit before
tax is forecast to average $129,700 per farm in the 2018/19 season, down 2.8% on the 2017/18 year.

5
Fonterra: www.fonterra.com
6
Beef + Lamb New Zealand: https://beeflambnz.com
3.34
3.97
4.37
3.85
3.87
7.59
4.75
6.10
7.60
6.08
5.84
8.40
4.40
3.90
6.12
6.69
6.75
–
1.00
2.00
3.00
4.00
5.00
6.00
7.00
8.00
9.00
NZD per kgMS

Page 26

Figure 4.2.3: Key livestock prices

Source: PWC VDD report
4.2.4 New Zealand government policy
The current Labour-led coalition government was formed after New Zealand’s general election in September 2017. The new
government has made several policy changes that could impact the rural sector going forward. Examples include:
• Restrictions on the sale of rural land to foreign buyers: A directive letter has been issued to the OIO to tighten rules
around the sale of all rural land larger than five hectares, other than forestry land.
• Reduced funding of irrigation schemes: The government will cease to fund new large-scale irrigation projects but has
agreed to honour commitments to existing schemes and three new projects. The Central Plains Water Stage 2, Kurow-
Duntroon and Waimea Community Dam schemes are still eligible to receive construction funding from the government due
to their advanced status. However, Tasman District councillors voted against proceeding with the Waimea Community
Dam project in late August 2018.
• Increases to the minimum wage: The legislated minimum wage rate increased from $15.75 to $16.50 per hour on 1 April
2018. Further increases will see the minimum wage set at $20 per hour by 2021, which could affect farm profitability.
4.2.5 Farmer confidence
Farmer confidence is a key determinant of on-farm activity and is driven by farmgate returns, weather conditions and
commodity prices.
The Rabobank Rural Confidence Survey for the quarter ended June 2018 shows that New Zealand farmer confidence has
declined since the previous quarter. Although farmer confidence remains at net positive levels, the index decreased to +2%
after being +15% in the March 2018 survey. Concern about Mycoplasma bovis disease was cited as the main reason for
reduced confidence amongst farmers. Farmers’ expectations of their own performance were down in the June 2018 quarter
but remain elevated overall, particularly for horticulturalists. Farmers’ investment intentions also remain strong despite the
reduction in confidence
7
.
New Zealand was one of the last countries in the world to have an outbreak of Mycoplasma bovis, but infected cattle were
detected on a South Canterbury dairy farm in July 2017. In May 2018, the government decided it would attempt to eradicate
the disease using a phased approach. It is expected that 126,000 additional livestock will need to be culled at an estimated
cost of $886 million
8
.

7
Rabobank Rural Confidence Survey (media release on 5 July 2018)
8
Stuff: www.stuff.co.nz/business/farming/105484274/Eradicating-cattle-disease-M-bovis-may-be-costly-even-impossible-but-we-must-try
–
1.00
2.00
3.00
4.00
5.00
6.00
7.00
8.00
9.00
10.00
NZD per kg
LambBeef

Page 27

4.2.6 New Zealand agricultural expenditure
PGW’s business model is intrinsically linked to New Zealand on-farm expenditure. On-farm expenditure has increased strongly
since 2007 (a year affected by drought) and the high farmgate milk prices paid out in the years up to 2013/14 led to many
farms being converted to dairy platforms and other high-intensity farming systems. The fall in farmgate milk prices observed
during the 2014/15 and 2015/16 milk seasons has caused farm expenditure to level off recently.
Figure 4.2.6 summarises New Zealand’s agriculture intermediate consumption, as a proxy for farm spending.
Figure 4.2.6: Agricultural sector intermediate consumption

Source: Statistics New Zealand
–
3,000
6,000
9,000
12,000
15,000
2007200820092010201120122013201420152016
NZD millions
Animal Health and BreedingFeed and GrazingFertiliser, Lime and Seeds
FreightFuel and PowerOther
Purchase of LivestockRepairs and MaintenanceWeed and Pest Control

Page 28

5 Financial Performance
5.1 Consolidated Financial Performance
Table 5.1 summarises PGW’s consolidated earnings for the period FY15 to FY18, as well as FY19 forecast information
prepared by PGW Management.
The FY19 budget was prepared as part of PGW Management’s budgeting process and was signed off by the PGW Board in
June. It represented PGW’s best estimate of financial performance for FY19 at that time. A revised FY19 forecast has recently
been prepared by Management and is presented in the tables and charts that follow. This reflects first quarter trading, which is
generally a quieter trading period for PGW given seasonality.
The revenue and expense components that make up FY19 EBITDA for the consolidated business and Rural Services’ business
segments are commercially sensitive.
Table 5.1: Consolidated earnings summary*

FY15 FY16 FY17 FY18 FY19
NZD millions
Actual Actual Actual Actual Forecast
Revenue 1,203.4 1,182.1 1,133.5 1,191.8
Cost of sales (885.7) (854.9) (804.3) (847.3)
Gross profit 317.7 327.2 329.2 344.5

Gross profit margin % 26.4% 27.7% 29.0% 28.9%
Salaries and wages (149.3) (156.1) (160.9) (165.8)
Direct expenses (98.8) (100.9) (103.8) (108.5)
EBITDA 69.6 70.2 64.5 70.2 69.5
Depreciation and amortisation (7.9) (9.2) (10.7) (13.0)
EBIT 61.7 61.0 53.8 57.2

EBIT margin % 5.1% 5.2% 4.7% 4.8%
* Non-trading items are excluded from EBITDA and EBIT
Source: PGW Management
Figure 5.1 presents a breakdown of PGW’s EBITDA by segment for the period FY15 to FY19.
Figure 5.1: EBITDA by segment

* Corporate includes sold/discontinued operations
Source: PGW Management
38.0
41.9
37.0
35.6
36.0
22.8
20.2
18.3
23.8
25.0
17.4
18.2
18.0
20.1
18.8
(8.5)
(10.0)
(8.8)
(9.4)
(10.4)
69.6
70.2
64.5
70.2
69.5
(20)
(10)
–
10
20
30
40
50
60
70
80
90
FY15AFY16AFY17AFY18AFY19F
NZD millions
Seed and GrainRetail and WaterAgencyCorporate*

Page 29

PGW’s revenue decreased by 4% between FY16 and FY17 due to reduced turnover by the Seed and Grain and Agency
segments of the business. Revenue recovered in FY18, up by approximately $58 million (an increase of 5%). All key operating
segments generated higher revenues in FY18 compared to the previous year.
PGW generated EBITDA of $70.2 million in FY18, as revenue increased and margins remained stable. This exceeded the top
end of the $65 million to $70 million guidance range provided to the market. The Retail and Water and Agency segments both
achieved record results in this period, reporting EBITDA growth of 30% and 12% respectively. Seed and Grain reported lower
earnings despite a relatively strong performance from its New Zealand business unit.
The Mycoplasma bovis disease outbreak has not affected PGW’s financial performance, to date. However, the Company is
working with customers and industry bodies to manage and monitor its impact on New Zealand’s rural sector.
PGW’s FY19 financial performance figures (shown above in 5.1) have been sourced from the Company’s revised forecast.
The macro assumptions underpinning the FY19 forecast include:
• a Fonterra farmgate milk price of $6.30 per kgMS;
• average beef and lamb commodity prices of $5.40 and $5.50 per kg respectively;
• an average crossbred wool price of $3.50 per kg;
• increased New Zealand milk-solids production and horticulture export volumes;
• stable sheep and cattle numbers in New Zealand; and
• general cost inflation of around 2% in New Zealand.
Management has forecast continued growth for PGW’s core business units and expects new technology investments across
Seed and Grain, Retail and Livestock to provide opportunities for further EBITDA upside. Notable technology initiatives include:
• Retail and Water’s RoBuST digital strategy;
• Agency’s online-trading platform for livestock and wool, and continued investment in Go Livestock products;
• Retail’s Agritrade expansion strategy; and
• further proprietary-seed innovation to grow the Seed and Grain business, particularly in South America.
Further details about the FY19 forecast are included in the sections that follow.
5.2 Seed and Grain Financial Performance
Table 5.2 summarises Seed and Grain’s historical earnings for the period FY15 to FY18, as well as FY19 forecast information
prepared by PGW Management.
For all business segments, earnings are presented post allocations of corporate costs related to shared services. PGW
Management has advised that the cost allocations represent best estimates of standalone costs for Seed and Grain.
Table 5.2: Seed and Grain earnings summary*

FY15 FY16 FY17 FY18 FY19
NZD millions
Actual Actual Actual Actual Forecast
Revenue 451.2 452.9 428.9 447.6 536.4
Cost of sales (333.6) (327.6) (304.3) (319.9) (396.3)
Gross profit 117.6 125.3 124.5 127.7 140.1
Gross profit margin % 26.1% 27.7% 29.0% 28.5% 26.1%
Direct expenses (77.1) (80.7) (84.7) (88.6) (100.1)
Corporate overhead allocation (2.5) (2.8) (2.8) (3.6) (3.9)
EBITDA 38.0 41.9 37.0 35.6 36.0
Depreciation and amortisation (3.5) (4.4) (5.5) (6.1) (7.8)
EBIT 34.5 37.5 31.5 29.6 28.2
EBIT margin % 7.6% 8.3% 7.4% 6.6% 5.3%
* Non-trading items are excluded from EBITDA and EBIT
Source: PGW Management

Page 30

Figure 5.2: Seed and Grain EBITDA by business unit

Source: PGW Management
Seed and Grain’s EBITDA decreased in FY17 and again in FY18. The FY17 financial performance was negatively impacted by
uncertainty in the dairy industry and challenging weather conditions, both of which affected Seed and Grain New Zealand and
Seed and Grain Australia. Wet conditions during April 2017 meant that New Zealand farmers were unable to complete their
regrassing and autumn pasture renewal plans. In Australia, dry conditions in the key dairy regions of Victoria contributed to
reduced demand for pasture seed.
The South American business achieved higher EBITDA in FY17, as performance recovered following the floods experienced in
2016.
EBITDA decreased to $35.6 million in FY18 due to weaker-than-expected results from Seed and Grain’s South American and
Australian operations. Extremely dry weather made trading conditions difficult in these markets and AgroCentro has
encountered issues with debtor management, as difficult climatic conditions have led to liquidity issues in Uruguay’s rural
sector.
The New Zealand business unit contributed 88% of Seed and Grain’s EBITDA in FY18, reflecting improvements to dairy-farming
conditions and overall farmer confidence in this country.
Management has forecast EBITDA for Seed and Grain in FY19 to be similar to the FY18 result. However, included in the
forecast for South America are two non-recurring expense items related to AgroCentro, which total approximately $3 million.
Normalising for these non-recurring costs would increase Seed and Grain’s forecast EBITDA to around $39 million for FY19.
5.3 Rural Services Financial Performance
Excluding Seed and Grain, PGW’s remaining operations are the Retail and Water, Agency and Corporate segments of the
business. These operations are collectively referred to as Rural Services in the Report.
5.3.1 Retail and Water
Table 5.3.1 summarises Retail and Water’s historical earnings for the period FY15 to FY18, as well as FY19 forecast
information prepared by PGW Management.

31.7
34.3
27.9
31.2
33.1
2.5
5.6
3.8
2.2
4.8
5.8
4.5
8.0
4.3
4.8
(2.0)
(2.6)(2.7)
(2.1)
(6.8)
38.0
41.9
37.0
35.6
36.0
(10)
–
10
20
30
40
50
FY15AFY16AFY17AFY18AFY19F
NZD millions
Seed and Grain NZSeed and Grain AustraliaSouth AmericaSeed and Grain Research / Corporate

Page 31

Table 5.3.1: Retail and Water earnings summary*

FY15 FY16 FY17 FY18 FY19
NZD millions
Actual Actual Actual Actual Forecast
Revenue 578.4 550.1 562.2 606.2
Direct expenses (545.7) (518.5) (533.1) (571.0)
Corporate overhead allocation (9.9) (11.3) (10.7) (11.4)
EBITDA 22.8 20.2 18.3 23.8 25.0
Depreciation and amortisation (1.4) (1.5) (1.7) (3.1)
EBIT 21.4 18.7 16.6 20.7
EBIT margin % 3.7% 3.4% 2.9% 3.4%
* Non-trading items are excluded from EBITDA and EBIT
Source: PGW Management
Retail and Water’s EBITDA decreased by $1.9 million in FY17 (a decrease of 9%), due to weakness in the Water unit’s financial
performance. The Water unit was negatively impacted by a market-wide reduction in the number of irrigation projects
implemented and uncertainty around irrigation policies in the lead up to the 2017 general election.
The Retail business unit performed well in FY17 and increased its operating EBITDA by $3.8 million (an increase of 19%).
Retail’s strong performance reflected growth in sales of high-margin products and the expansion of PGW’s Agritrade business.
Retail and Water achieved a record EBITDA of $23.8 million in FY18, as Retail’s and Water’s contributions both improved on
the previous year. The Retail business unit continues to benefit from its technical expertise and PGW’s strategy to invest in
Agritrade (PGW’s wholesale distribution business servicing PGW’s retail stores and third parties). The Water unit experienced
challenges over this period due to reduced investment in irrigation schemes.
Management expects further earnings growth to be achieved in FY19, through the continued expansion of Retail’s key product
lines and Agritrade business, and via Water seeking to broaden its service offering in order to stabilise its earnings.
5.3.2 Agency
Table 5.3.2 summarises Agency’s historical earnings for the period FY15 to FY18, as well as FY19 forecast information
prepared by PGW Management.
Table 5.3.2: Agency earnings summary*

FY15 FY16 FY17 FY18 FY19
NZD millions
Actual Actual Actual Actual Forecast
Revenue 218.4 229.0 197.5 200.8
Direct expenses (193.8) (203.2) (173.4) (174.4)
Corporate overhead allocation (7.2) (7.6) (6.1) (6.3)
EBITDA 17.4 18.2 18.0 20.1 18.8
Depreciation and amortisation (1.3) (1.3) (1.1) (1.1)
EBIT 16.1 16.9 16.9 19.0
EBIT margin % 7.4% 7.4% 8.5% 9.5%
* Non-trading items are excluded from EBITDA and EBIT
Source: PGW Management
The Agency segment achieved similar EBITDA results in FY16 and FY17 (approximately $18 million), but the earnings mix was
different. The Livestock business unit delivered record earnings in FY17, as strong international demand for meat products and

Page 32

lower stock numbers combined to drive up livestock prices. Conversely, the Wool unit was negatively impacted by a collapse in
global crossbred wool prices, which resulted in lower volumes of wool being sold.
The performance of PGW’s Real Estate, Insurance and Finance units remained relatively stable between FY16 and FY17.
Agency delivered a record EBITDA of $20.1 million in FY18, up 12% on the FY17 result. The Livestock unit performed well again
due to consistently strong sheep and beef prices, and the Wool business unit recovered as underlying crossbred wool prices
improved and sales volumes increased.
New Zealand’s rural real estate market softened during FY18, which made trading conditions difficult for the Real Estate unit.
PGW Management has attributed the weak market conditions to heightened uncertainty regarding a number of factors,
including bank funding, Mycoplasma bovis and changes to government policy around land sales to foreign buyers and the
environment.
Management has forecast lower earnings for the Agency segment in FY19. The recent results achieved by the Livestock and
Wool business units are not considered sustainable given the cyclical nature of these markets. However, PGW’s Go Livestock
products and online-trading platform are expected to drive efficiencies and future growth in commission revenues.
5.3.3 Corporate
Table 5.3.3 summarises PGW’s corporate overheads for the period FY15 to FY19.
PGW incurred total corporate costs of $31 million in FY18, in line with FY17. More than $20 million of the total corporate costs
incurred in FY18 related to shared services for PGW’s core operating segments (Seed and Grain, Retail and Water and Agency).
These expenses are allocated to each segment based on a detailed analysis of their use of the shared services. The cost
allocations are denoted as “Corporate overhead allocation” in the table below.
At an EBITDA level, this leaves approximately $10 million of overheads within the Corporate segment. These are costs related
to head office and governance functions that have not been allocated to the business segments.
Table 5.3.3: Corporate overheads*

FY15 FY16 FY17 FY18 FY19
NZD millions
Actual Actual Actual Actual Forecast
Sold and discontinued 3.4 3.3 3.1 0.7
Direct expenses (31.5) (35.1) (31.6) (31.2)
Corporate overhead allocation 19.6 21.7 19.6 21.2
EBITDA (8.5) (10.0) (8.8) (9.4) (10.4)
Depreciation and amortisation (1.8) (2.0) (2.3) (2.7)
EBIT (10.3) (12.1) (11.2) (12.1)
* Non-trading items are excluded from EBITDA and EBIT
Source: PGW Management
The table above includes sold and discontinued operations in order to reconcile to consolidated financial statements.

Page 33

6 Financial Position
Table 6 summarises PGW’s consolidated financial position as at 30 June 2018. The table also includes a balance sheet for
Seed and Grain, which represents the net assets to be acquired by DLF Seeds in accordance with the Proposed Transaction.
The Proposed Transaction has a locked-box pricing mechanism, which means DLF Seeds would effectively assume all risks and
rewards of the Seed and Grain business from 30 June 2018 onwards. PGW’s investment in Agri Optics, a New Zealand
business specialising in precision agriculture products, will not transfer across with Seed and Grain under the Proposed
Transaction.
Table 6: Consolidated and Seed and Grain balance sheets
30-Jun-18
Consolidated Seed and Grain*
NZD millions
Trade and other receivables 307.0 133.3
Inventory and WIP 263.4 185.2
Trade and other payables (197.0) (87.4)
Accruals and provisions (71.2) (19.3)
Other working capital (8.7) (2.0)
Net working capital 293.6 209.8
Property, plant and equipment 124.2 78.0
Investments 16.8 15.7
Intangible assets 13.0 1.0
Deferred tax asset/(liability) 16.3 3.7
Other non-current assets/(liabilities) (1.2) 17.7
Long-term net operating assets 169.0 116.1
Cash and cash equivalents 10.9 8.3
Overdraft and short-term debt (30.6) (21.3)
Long-term debt (145.9) (27.9)
Defined benefit superannuation scheme provision (9.7) (0.1)
Net cash/(debt) (175.2) (41.1)
Net assets 287.5 284.8
* Agri Optics investment will not transfer as part of the Proposed Transaction
Source: PGW Management
6.1 Consolidated Financial Position
Key points to be considered when reviewing PGW’s balance sheet include:
• PGW has a significant net working capital (NWC) requirement due to the nature of the business, with approximately 66%
of the Company’s NWC invested in the Seed and Grain business. NWC increased in FY18 and continues to track higher
than budget levels. Receivables related to the Go Livestock products have increased significantly and are the key driver of
PGW’s net working capital growth. The Go Livestock receivables balance is budgeted to average $37m throughout FY19
and is approximately $40 million at present.
• NWC is cyclical in nature, but the balance is smoother for the group than for the individual business segments. This is
because NWC has varied seasonal patterns across different segments and this seasonality is partially offset upon
consolidation. Figure 6.1 below highlights the seasonality of PGW’s consolidated NWC balance.

Page 34
Figure 6.1: Consolidated net working capital
Source: PGW Management
•Property, plant and equipment included land and buildings with a net book value of $60.4 million, leasehold
improvements, plant and equipment with a net book value of $60.0 million and capital works projects of $3.8 million as at
30 June 2018. Management is undertaking a property divestment programme and realised a $1.7 million gain on sale of
properties in FY18. Management plans to dispose of PGW’s retail property in Amberley during the first half of FY19.
•Investments relates primarily to Seed and Grain’s 50% equity investments in AgroCentro and Fertimas. The investment in
AgroCentro was impaired by $7.8 million in FY18, partially offset by a $5.1
million release of an earnout provision held as
part of the original AgroCentro investment. Furthermore, as part of finalising the Seed and Grain purchase price,
subsequent changes have been made to account for inventory, debtor and value adjustments relating to South America
(including AgroCentro), which totalled a further reduction of $6.9 million.
•Intangible assets are made up of software, trademarks, patents and rights. The carrying value of intangible assets
increased in FY18, reflecting PGW’s recent IT investments.
•Interest-bearing debt comprises a syndicated banking facility in Australia and New Zealand, finance leases in Australia,
New Zealand and South America and various bank facilities in South America. Total interest-bearing debt increased by
$40.8 million in FY18 to help fund working capital growth (notably Go Livestock receivables), capital expenditure and
dividend distributions.
•PGW makes contributions to a defined benefit plan, which provides a range of superannuation and insurance benefits to
current and former employees. The provision recognised on PGW’s balance sheet is considered a debt-like item.
220
240
260
280
300
320
340
360
JulAugSepOctNovDecJanFebMarAprMayJun
NWC NZD millions
FY16FY17FY18FY18 (excl. change in GO receivables)

Page 35

6.2 Seed and Grain Financial Position
6.2.1 Net working capital
Seed and Grain makes significant investments in inventory, due to the long planning and production cycle associated with
seeds. It also maintains high receivables and payables balances due to long payment terms in the South American market.
Seed and Grain contributes approximately two thirds of PGW’s overall NWC level.
Management maintains initiatives to minimise the NWC, particularly with regards to excess inventories currently being held by
Seed and Grain’s Australian and South American businesses.
Seed and Grain’s NWC is seasonal and the working-capital cycle differs for the New Zealand, Australian and South American
business units. Overall, Seed and Grain’s NWC balance peaks in September (as a result of spring sales in New Zealand and
crop sales in South America) and April/May (being autumn sales in Australasia and pasture sales in South America) each year
and experiences a trough during January prior to the new season harvest.
Figure 6.2.1: Seed and Grain net working capital

Source: PGW Management
6.2.2 Debt
Seed and Grain’s net interest-bearing debt was $44 million as at 30 June 2018, being $52 million of short-term and long-term
borrowings (including finance leases) less $8 million of cash on hand.
Seed and Grain’s debt is in the form of various bank facilities, which are used to fund South American operations and are
denominated in United States dollars. PGW’s syndicated banking facility is not allocated to the core operating segments of the
business.
140
160
180
200
220
JulAugSepOctNovDecJanFebMarAprMayJun
NWC NZD millions
FY16FY17FY18

Page 36

6.3 Rural Services Financial Position
Table 6.3 displays a post-transaction balance sheet for Rural Services, which represents PGW’s consolidated balance sheet
less Seed and Grain’s net assets to be transferred and makes adjustments for the Seed and Grain sale proceeds and planned
uses of the capital. The pro-forma balance sheet summary shows Rural Services’ financial position as at 30 June 2018, as if
the Proposed Transaction and subsequent capital adjustments had occurred on that date.
After completion adjustments, DLF Seeds has agreed to pay $413 million to purchase the equity of the Seed and Grain
business. Following the Proposed Transaction, PGW may potentially make a tax-free cash distribution to shareholders of up to
$292 million of available subscribed capital (subject to a favourable binding ruling from the IRD) and use the remaining
proceeds from the divestment to pay down debt.
As shown in Table 6.3 below, Rural Services would have a pro-forma debt balance, as at 30 June 2018, of approximately $36
million if the PGW Board decided to make a total cash distribution to shareholders of $292 million.
Table 6.3: Rural Services balance sheet summary
30-Jun-18 Consol. Proposed Transaction Adjustments
Rural
Services
NZD millions Pro forma*
Price
adjustment
S&G
sale
Capital
return**
Debt
repay
Pro forma
Trade and other receivables 173.8



173.8
Inventory and WIP 78.2



78.2
Trade and other payables (109.6)



(109.6)
Accruals and provisions (51.9)



(51.9)
Other working capital (6.7)



(1.5) (8.2)
Net working capital 83.8

– – (1.5) 82.3
Property, plant and equipment 46.2



46.2
Investments 286.0 (6.9) (277.9)

1.2
Intangible assets 12.0



12.0
Deferred tax asset/(liability) 12.5



12.5
Other non-current assets/(liabilities) (18.9)



24.7 5.8
Long-term net operating assets 337.8 (6.9) (277.9) – 24.7 77.7
Cash and cash equivalents 2.7

413.0 (292.0) (123.7) –
Overdraft and short-term debt (9.2)



(9.2)
Long-term debt (118.0)



100.5 (17.5)
Defined benefit superannuation scheme provision (9.5)



(9.5)
Net cash/(debt) (134.1) 413.0 (292.0) (23.2) (36.2)
Net assets 287.5 (6.9) 135.1 (292.0) – 123.7
* Consolidated balance sheet presents the net book value of Seed and Grain as part of Investments
** PGW may make a capital return to shareholders, up to a maximum of $292 million
Source: PGW Management

Page 37

7 Cash Flow
7.1 Capital Expenditure
Figure 7.1 presents a breakdown of cash capital expenditure (capex) by segment over the FY14 to FY19 period.
Figure 7.1: Capex by segment

Source: PGW Management
Seed and Grain incurred significant capex in FY16, in particular. Spend in this year included the:
• investment in South American retailer, AgroCentro (US$6.0m);
• construction of a logistics centre in Montevideo, Uruguay (US$14.5m across FY15 and FY16); and
• construction of a maize dryer in Gisborne ($6.5m).
Seed and Grain’s capex is forecast to be $17 million in FY19. Included is spend on a new office in Christchurch and various
operational and R&D plant and equipment, including Stage 2 of the maize facility in Gisborne.

7
14
37
12
13
17
37
5
7
9
16
14
-
5
10
15
20
25
30
35
40
45
50
FY14AFY15AFY16AFY17AFY18AFY19F
NZD millions
Seed and GrainRural Services

Page 38

7.2 Dividends
PGW declared a final dividend of 1.25 cents per share for FY18, which is fully imputed and was paid to shareholders on 3
October 2018.
This is lower than the final distribution of 2.00 cents per share paid in FY16 and FY17. PGW Management has cited
reinvestment opportunities and reduced net profit after tax (NPAT) following one-off, non-trading items (including remediation
costs for historical liabilities under the Holidays Act 2003) as the key reasons for the reduced payment to shareholders.
PGW’s interim and final dividend payments for FY16, FY17 and FY18 are shown below. All dividends have been fully imputed.
Figure 7.2: PGW dividends

Source: PGW Management
1.751.751.75
2.002.00
1.25
3.753.75
3.00
0.00
0.50
1.00
1.50
2.00
2.50
3.00
3.50
4.00
FY16FY17FY18
NZ cents per share
InterimFinal

Page 39

8 Share Ownership and Price History
8.1 PGW Share Register
PGW has 754,848,774 shares on issue and more than 12,000 registered shareholders. As at 31 August 2018, the top 20
shareholders accounted for 65.8% of the ordinary shares on issue.
Table 8.1.1: Share register as at 31 August 2018
Shareholder Shares Percentage
1. Agria (Singapore) Pte Limited 379,068,619 50.2%
2. HSBC Nominees (New Zealand) Limited 22,027,874 2.9%
3. Forsyth Barr Custodians Limited <1-Custody> 19,288,716 2.6%
4. FNZ Custodians Limited 11,863,087 1.6%
5. Masfen Securities Limited 10,400,000 1.4%
6. HSBC Nominees (New Zealand) Limited A/C State Street 7,851,730 1.0%
7. Accident Compensation Corporation 7,075,511 0.9%
8. Citibank Nominees (New Zealand) Limited 4,888,952 0.7%
9. BNP Paribas Nominees (NZ) Limited 4,844,369 0.6%
10. JPMorgan Chase Bank NA NZ Branch 3,428,752 0.5%
11. Leveraged Equities Finance Limited 3,376,910 0.5%
12. Philip Carter 3,358,702 0.4%
13. H & G Limited 3,067,323 0.4%
14. Michael Benjamin 3,000,000 0.4%
15. Forsyth Barr Custodians Limited <2-33> 2,682,868 0.4%
16. Custodial Services Limited 2,634,327 0.4%
17. FNZ Custodians Limited <DTA Non Resident A/C> 2,279,142 0.3%
18. Arden Capital Limited 2,004,605 0.3%
19. Nicolaas Kaptein 2,000,410 0.3%
20. Woolf Fisher Trust Incorporated 1,850,000 0.3%
Top 20 shareholders 496,991,897 65.8%
Remaining shareholders 257,856,877 34.2%
Total 754,848,774 100.0%
Source: PGW Management
The major shareholder is Agria, which holds 50.2% of the ordinary shares on issue.
Other than a high concentration with Agria, PGW’s ordinary shares are widely held by retail investors.

Page 40

8.2 Share Price Performance
Figure 8.2 illustrates the share price and volume for PGW shares since July 2011.
Figure 8.2: Share price and volume on NZX Main Board














Source: Capital IQ and KordaMentha analysis
PGW’s share price has increased over the last two years and reached a high of $0.71 in June 2018.
Approximately 86 million PGW shares traded in the 12 months prior to the Proposed Transaction, at prices between $0.55 and
$0.71 per share. PGW shares have a relatively modest level of liquidity on the NZX Main Board.
The share price has increased since PGW announced it would be undertaking a strategic review of the business, from $0.58
prior to the announcement to $0.70 following the announcement of the Proposed Transaction on 6 August 2018. PGW’s share
price was $0.61 as at 30 September 2018.
Table 8.2: VWAP and volume as at 5 August 2018
Share Price
Volume
(million)
Proportion of
Issued Capital Low High VWAP
One month $0.62 $0.68 $0.66 10.0 1.3%
Three months $0.61 $0.71 $0.67 33.7 4.5%
Twelve months $0.55 $0.71 $0.62 86.0 11.4%
Source: Capital IQ and KordaMentha analysis

0
10
20
30
40
50
60
70
0.00
0.10
0.20
0.30
0.40
0.50
0.60
0.70
0.80
FY12FY13FY14FY15FY16FY17FY18FY19
VolumeShare Price
PGW enters into
agreement to
sell PGWSHL
Tworecord years of
high rainfall
PGW first-quarter earnings
guidance indicates more difficult
trading environment in NZ
Commerce
Commission files
court proceedings
for price fixing
Agria
(Singapore) Pte
Ltd. acquires
50.2% in PGW
PGW full-year earnings
guidance
(repeat of record
performance)
PGG Wrightson
Finance sold to
Heartland New
Zealand
PGW announces half-year
results
Repayment of Crafar Farms
loans (c.$25m) and agreements
to showcase and develop
agriculture in China
PGW announces half-
year results
PGW announces NPAT
increased by approx.
20% in FY16
PGW announces
annual results
Daily VWAP (NZD)

Monthly volume (millions)

Page 41

9 Assessment of the Proposed Transaction
To assess the Proposed Transaction, we have considered:
• the Proposed Transaction’s price and terms and conditions relative to our assessment of the value of the Seed and Grain
business; and
• other factors relevant to shareholders when assessing the Proposed Transaction.
9.1 Valuation of the Seed and Grain Business
9.1.1 Approach
There are four methodologies commonly used for valuing businesses:
• Discounted Cash Flow (DCF) analysis;
• Capitalisation of earnings;
• Estimate of proceeds from an orderly realisation of assets; and
• Industry rules of thumb.
Each of these valuation methodologies is appropriate in different circumstances. A key factor in determining which
methodology is appropriate is the actual practice commonly adopted by purchasers of the type of businesses involved. These
valuation methodologies are detailed in Appendix 3.
Any valuation, by its very nature, must attribute a current value that reflects the expected future financial performance of the
subject business. Consequently, information regarding the expected future performance, such as financial projections, is vital
to the valuation exercise.
For the purposes of informing the Report, PGW Management has prepared a revised FY19 forecast which has been disclosed
in the Report. In addition, PGW Management has prepared an indicative forecast for the period FY20 to FY23, which reflects
Management’s best estimate of the longer-term prospects of the Seed and Grain business. This indicative forecast has been
used to inform the assessed DCF valuation range, but has not been disclosed in the Report.
We have adopted the capitalisation of earnings and DCF methodologies to assess the market value of Seed and Grain on a
standalone basis. Our primary valuation methodology is the capitalisation of earnings approach, given the nature of
information made available to us. We have supported our primary valuation methodology by performing DCF analysis using the
indicative forecast provided.
9.1.2 Capitalisation of earnings
Earnings multiple
To undertake a capitalisation of earnings valuation, it is necessary to determine an appropriate earnings multiple to be applied
to an estimate of earnings.
Comparable earnings multiples are generally derived by benchmarking the entity being valued against the sale and purchase
of shares in comparable companies. Transaction evidence is typically sourced from:
• earnings multiples based on the current share prices of comparable listed companies; and
• earnings multiples based on recent transactions of comparable companies.
Comparable trading multiples
We have selected comparable listed companies based on the following criteria:
• Industry: We have selected companies that supply goods and services to the agricultural sector, including seed and grain
products.
• Geography: We have selected Australasian and international rural-servicing businesses. The selected companies are likely
to be impacted by similar macro-economic trends affecting the markets for agricultural products.

Page 42

• Size: Companies with an enterprise value above $80 million have been selected. The enterprise value is much higher for
most of the businesses analysed, but we have excluded the relatively small businesses which tend to have lower
multiples.
Figure 9.1.2a illustrates the forecast EBITDA multiples for the respective listed companies. We have divided the comparable
companies into two subsets: (1) Australasian companies (which are domiciled in either Australia or New Zealand) and (2)
international companies.
Our analysis has been set out in more detail in Appendix 4.
Figure 9.1.2a: Comparable listed companies – forecast EBITDA multiples


Source: Capital IQ and KordaMentha estimates
The comparable listed companies have forecast EBITDA multiples in a range between 5.8x and 11.5x EBITDA. There are a
number of fundamental differences between Seed and Grain’s operations and those of the listed comparable companies, as
summarised below:
• The listed companies tend to offer a diversified range of products and services to rural customers, whereas Seed and
Grain is solely focused on seed and grain products. The comparable companies are therefore exposed to a wider range of
consumer markets than Seed and Grain and will have different earnings drivers.
• Seed and Grain is smaller than most of the comparable companies, with only one business, Wynnstay Group plc, having
lower EBITDA than Seed and Grain.
• Seed and Grain’s historical revenue and EBITDA growth has been variable and lower than the typical growth achieved by
the comparable companies.
• Seed and Grain generates a higher earnings margins than most of the comparable companies, owing to its strong portfolio
of IP and proprietary-seed offering.
• Skellerup Holdings and Scales Corporation are not direct competitors of Seed and Grain. These agricultural businesses are
included to ensure New Zealand market data has been considered in our valuation assessment. They trade in line with,
although slightly higher than, the other comparable companies.
Observed trading multiples need to be adjusted for factors such as relative size, growth, profitability and risk.
The comparable trading multiples are based on prices assessed for small minority parcels of shares. Therefore, the multiples
set out above do not include a control premium that would typically apply to a 100% shareholding.
–
2.0x
4.0x
6.0x
8.0x
10.0x
12.0x
14.0x
Ruralco Holdings
Elders
Nufarm
Ridley Corporation
Lindsay Australia
GrainCorp
Skellerup Holdings
Scales Corporation
Bunge
Olam International
China Agri-Industries
Holdings
The Andersons, Inc.
AGT Food and Ingredients
Wynnstay Group
ADM Company
Camil Alimentos S.A.
FY19 EBITDA multiple
International
Australasia
8.3x
9.2x

Page 43

The profitability of Seed and Grain is typically higher than that of the comparable companies analysed. Seed and Grain
generated an earnings before interest and tax (EBIT) margin of approximately 7% in FY18, compared to a median of 4% for the
comparable businesses. Seed and Grain’s R&D programme and development of proprietary products helps to deliver high
earnings margins for the business. New Zealand has the most proprietised forage-seeds market in the world.
We have also considered the valuation multiples implied by transactions involving comparable businesses. These are outlined
below.
Comparable transaction multiples
Figure 9.1.2b illustrates the historical EBITDA multiples implied by announced transactions of broadly comparable rural-
servicing businesses. The comparable companies have seed and grain operations.
We have applied the same selection criteria as used for the comparable trading multiples, and only transactions announced
since the beginning of 2012 were considered. The selected transactions include acquisitions of both majority and minority
interests and not all transactions have completed (the uncompleted transactions are marked in red).
Further details of our analysis, including descriptions of the transactions, are included in Appendix 4.
Figure 9.1.2b: Comparable transactions – historical EBITDA multiples



Source: Mergermarket and KordaMentha estimates
The following factors are relevant when considering transaction multiples:
• The transaction multiples presented in Figure 9.1.2b are historical multiples based on the companies’ earnings in the
most recent 12 months prior to the transaction. Some of the transactions set out above involved unlisted companies and
as such, the level of public information is limited. Typically, assuming business earnings are increasing, forecast earnings
multiples are lower than historical earnings multiples.
• The comparable transactions have EBITDA multiples in a wide range of approximately 6x to 17x, with an overall median of
9.6x. The Plum Grove Pty Ltd. transaction is at the high end of the range and appears to have been skewed by the low
level of earnings relative to assets acquired.
• Removing outliers at the top and bottom ends of the range adjusts the median EBITDA multiple to above 10.0x.

–
2.0x
4.0x
6.0x
8.0x
10.0x
12.0x
14.0x
16.0x
18.0x
Sunrise Agritec Co.
Bayer AG (Crop Science)
Beijing Origin Seed
Glencore (Ag Products)
Tereos Internacional S.A.
Suba Seeds
Olam International
Spearhead International
Guangxi Kanghua
Agricultural
AFGRI Limited
GrainCorp
Tandou
Padiberas Nasional Berhad
Plum Grove
Viterra Inc.
EBITDA multiple
2014
9.6x
2017
2016
2015
2013 2012

Page 44

• GrainCorp Limited is a listed company headquartered in Australia, engaged in handling and storing grain and other bulk
commodities. Of the target companies included in Figure 9.1.2b, GrainCorp is the most directly comparable to Seed and
Grain. In 2013, Archer Daniels Midland (ADM) Company approached GrainCorp to acquire the 80.15% shareholding it did
not already own, at a multiple of 8.9x EBITDA. However, the takeover was deemed to be against Australia’s national
interest and was rejected by the government.
Selection of earnings multiple range
We have selected an earnings multiple range between 10.0x and 10.5x to apply to Seed and Grain’s normalised EBITDA. The
selected multiple has been determined as follows:
• 9x EBITDA is the median forecast multiple observed for the comparable trading companies, considering all of the
Australasian and international businesses analysed. We consider an EBITDA multiple between 10.0x and 10.5x is more
appropriate when the trading multiples are adjusted to include a control premium and to recognise Seed and Grain’s
higher profitability, R&D investment programme and proprietary products.
• 10.0x is broadly reflective of the historical transaction multiples observed. A multiple above 10x EBITDA is applicable when
outliers in the set are removed from consideration.
Normalised earnings
For valuation purposes, we have assessed Seed and Grain’s normalised EBITDA to lie in a range between $36 million and $42
million, although note that Seed and Grain’s recent trading results sit at the low end of this range.
The lower bound of $36 million reflects the EBITDA achieved by Seed and Grain in FY18 and the lowest EBITDA result observed
since FY15. Management has also forecast EBITDA to be $36 million in FY19.
The high end of $42 million reflects the best EBITDA result achieved by Seed and Grain over the period FY15 to FY18. $42
million EBITDA is therefore attainable for the business, particularly in years when trading conditions are favourable for the
Australian and South American business units. We note that this earnings level appears optimistic given Seed and Grain’s
recent trading history and projected financial performance.
These figures are estimates of Seed and Grain’s earnings on a standalone basis. As part of the Proposed Transaction, Seed
and Grain (under DLF Seeds’ ownership) would enter into distribution, brand and shared-services agreements with PGW. We
understand that these arrangements would leave Seed and Grain in a similar operating and financial position to its current
situation.
Capitalisation of earnings valuation summary
Our capitalisation of earnings valuation results in a standalone enterprise value between $360 million and $441 million for the
Seed and Grain business.
This compares to the effective consideration of $434 million offered by DLF Seeds, being $413 million for 100% of the shares
of PGWSHL plus $21 million of debt liabilities assumed.
Based on the assessed EBITDA, as shown below, the effective consideration from DLF Seeds represents an implied EBITDA
multiple of between 10.3x and 12.1x. The higher end of this range is above our assessed EBITDA multiple range, and the lower
end sits in the middle of our assessed multiple range.
The capitalisation of earnings calculation is set out in Table 9.1.2 below.
Table 9.1.2: Capitalisation of earnings valuation
NZD millions Low High
Assessed EBITDA 36.0 42.0
Multiple 10.0x 10.5x
Enterprise value 360.0 441.0
Source: KordaMentha analysis

Page 45

9.1.3 Discounted Cash Flow
We have performed DCF analysis to compare to the results of our capitalisation of earnings valuation. Details are provided
below.
Key assumptions and valuation parameters
Valuation date: 30 June 2018.
Forecast period: The DCF valuation is based on Seed and Grain’s revised FY19 forecast and the indicative forecast for FY20 to
FY23. Collectively, this represents a five-year forecast ending 30 June 2023.
The projections represent PGW Management’s best estimates of Seed and Grain’s financial performance on a standalone
basis.
EBITDA: Seed and Grain’s EBITDA is expected to be similar in FY19 to FY18, but grow at a compound annual growth rate
(CAGR) of approximately 12% over the five-year forecast period. The South American and Australian businesses are expected
to lead the expansion in earnings, while Seed and Grain New Zealand is forecast to achieve relatively steady year-on-year
growth. EBITDA margin increases from 7% to 10% in the indicative forecast, as operating cost growth is expected to be slightly
lower than revenue growth.
Movements in NWC: The active management of excess inventories and overdue debtors is expected to reduce Seed and
Grain’s NWC balance in FY19, releasing approximately $16 million of cash for the business. The indicative forecast then allows
for NWC requirements to increase broadly in line with revenue between FY20 and FY23, maintaining an average working
capital turnover ratio of approximately 2.5x.
Capex and depreciation: Capital additions are projected to average $11 million over the forecast period, which is in line with
average net capex over the FY14 to FY18 period. Capex is projected to be higher in the near term, as known projects like Stage
2 of the maize facility in Gisborne are recognised in the indicative forecast. As the outer years approach, it is possible that
more capital projects will be initiated and actual capex could be higher. We have set capex equal to average depreciation of $6
million per annum in our terminal value calculation.
Terminal valuation assumptions: Terminal value is calculated by assuming unlevered free cash flows grow in perpetuity at the
terminal growth rate. We have adopted a range of 1.5% to 2.5% per annum for the terminal growth rate. This range is based on
observed trends in Seed and Grain’s historical earnings and cash flows, and on the forecast cash flows provided by
Management. We have been cognisant of the varied performance results achieved by Seed and Grain Australia and South
America and the downward pressure on agricultural prices observed since 2014, which is a trend that industry commentators
expect to continue over the coming decade.
Weighted Average Cost of Capital (WACC): We have estimated Seed and Grain’s nominal, post-tax WACC at between 9.3% and
9.7%. This WACC range has been used to discount Seed and Grain’s forecast free cash flows, denominated in New Zealand
dollars. Our WACC calculation has been set out in Appendix 5.
DCF valuation summary
Table 9.1.3 summarises our DCF valuation of Seed and Grain, based on the revised FY19 forecast and indicative forecast
(FY20 to FY23) provided by PGW Management.
The DCF valuation results in a standalone enterprise value between $377 million and $413 million. To derive this range, we
have relied upon:
• the five-year indicative forecast provided by PGW Management;
• terminal growth in the range of 1.5% to 2.5% per annum; and
• our assessed WACC range of 9.3% to 9.7%.
The DCF valuation is heavily dependent on the terminal value assumptions adopted. More than 75% of Seed and Grain’s
enterprise value is contributed by the terminal value calculation.

Page 46

Table 9.1.3: DCF valuation
NZD millions Low High
Terminal growth rate 1.5% 2.5%
WACC 9.7% 9.3%
DCF of FY19 – FY23 84.4 85.1
Terminal value 292.7 328.2
Enterprise value 377.0 413.3
Source: KordaMentha analysis
The DCF valuation is very sensitive to changes that impact Seed and Grain’s earnings results and margins, as is illustrated by
Figure 9.1.3 below. We consider there is risk around Seed and Grain’s ability to achieve the EBITDA growth and margin
expansion projected by Management, which require all business units to consistently improve over the next five years. Future
outcomes are particularly uncertain for the Australian and South American businesses, which both have a track record of
inconsistent performance due to events outside of PGW Management’s control (e.g. weather conditions) and are currently in a
recovery phase.
The valuation also depends on Management’s ability to effectively reduce Seed and Grain’s debtor and inventory levels and
normalise its NWC balance. Active working capital management is required to achieve working capital turnover of 2.5x and
maintain the ratio at this level in the long run.
Sensitivity analysis
Figure 9.1.3 shows that relatively small changes in key assumptions can have a material impact on the DCF valuation results.
The DCF valuation is particularly sensitive to assumptions that influence Seed and Grain’s EBITDA and EBITDA margin. A +/-
1% change to the forecast CAGR for EBITDA results in an enterprise value range of $372 million to $417 million
9
. Similarly, +/-
0.5% adjustments to Seed and Grain’s forecast EBITDA margins result in a range between $363 million and $426 million
10
.
More detailed sensitivity analysis could not be performed, due to the limited nature of PGW’s indicative forecast.
Figure 9.1.3: DCF sensitivity analysis

Source: KordaMentha analysis

9
This sensitivity is calculated by adjusting EBITDA growth rates up or down by 1%, compared to Management’s base growth assumptions, in
each forecast period. This is a compounded effect that also impacts the terminal value calculation.
10
In each forecast year, the EBITDA margins projected by PGW Management are adjusted higher or lower by 0.5%. Terminal value is affected.
350360370380390400410420430440
EBITDA CAGR +/- 1%
EBITDA margin +/- 0.5%
WACC +/- 0.5%
Terminal growth +/- 0.5%
Capex per annum +/- 10%
NWC investment per annum +/- 10%
NZD millions

Page 47

9.1.4 Standalone valuation summary
Figure 9.1.4 presents the standalone enterprise value ranges from our capitalisation of earnings and DCF valuation
approaches. We have assessed a valuation range for Seed and Grain, on a standalone basis, between $377 million and $441
million with a midpoint of $409 million.
The effective purchase price offered by DLF Seeds sits within the top end of our assessed range for Seed and Grain’s
enterprise value.
Figure 9.1.4: Standalone valuation summary for Seed and Grain

Source: KordaMentha analysis
9.1.5 Head office costs and synergies
PGW has approximately $10 million per annum of unallocated corporate costs. These costs represent the governance and
head office costs of the Company. However, potentially some of these costs are required to service the Seed and Grain
business and similar costs may need to be incurred by DLF Seeds as the new owner of Seed and Grain. Furthermore, there is
also potential for some of these corporate costs to be reduced in Rural Services should the Seed and Grain business be sold.
For the purposes of our analysis of the Proposed Transaction, we have not quantified the impact of any additional costs that
may be incurred, which would reduce the standalone value of Seed and Grain. Nor have we considered some potential benefits
to PGW’s shareholders from reducing the corporate cost base. There is a significant amount of uncertainty as to what the
quantum of any of these costs might be and whether they would necessarily relate directly to the Seed and Grain business. We
note that any additional costs that could be incurred by DLF Seeds in providing these governance services to the Seed and
Grain business may be more than offset by potential synergies available to DLF Seeds from owning the Seed and Grain
business.
DLF Seeds’ rationale for acquiring the Seed and Grain business is to develop complementary geographic operations in the
temperate and cool-climate seeds industries in the Northern and Southern Hemispheres. In DLF Seeds’ view this will allow for:
• further investment in research and development, including new biotechnology methods;
• a unique global supply chain, utilising DLF Seeds’ Northern Hemisphere presence and Seed and Grain’s business in
Australasia and South America; and
• combining the skill sets of the two businesses, knowledge sharing, best practices and business development.
DLF Seeds advises us that it foresees limited changes to the Seed and Grain business following its acquisition. DLF Seeds also
notes that the acquisition is not driven by significant cost synergies, although it has identified potential market synergies where
the combination of supply chains and market access is expected to drive synergies and allow for global distribution of Seed
320330340350360370380390400410420430440450460470480490500
Capitalisation of Earnings
DCF Valuation
Assessed Range
NZD millions
Effective purchase price

Page 48

and Grain’s products through its sales network, predominantly in the Northern Hemisphere where Seed and Grain’s current
market access is not comprehensive.
DLF Seeds advises that while it has identified potential market synergies and, to a lesser extent, has investigated some
potential cost synergies, it has not quantified those and expects to do so after properly engaging with Seed and Grain
Management following the acquisition, should the Proposed Transaction proceed.
For the purposes of our analysis of the Proposed Transaction, we have not been able to quantify any impact of potential
synergies from DLF Seeds’ acquisition of Seed and Grain. In any event, our valuation analysis for the Seed and Grain business
includes an allowance for a control premium which, in turn, makes allowance for the typical level of synergies available to
acquirers of businesses. We have been provided with no additional analysis that would suggest the synergies available to DLF
Seeds would be materially higher or lower than those typically observed in other sales of broadly comparable businesses.
9.2 Other Factors Relevant to Shareholders
9.2.1 Likelihood of the Proposed Transaction being approved
Agria, as PGW’s largest shareholder, controls 50.2% of PGW’s voting rights. We understand, as at 30 September 2018, that
Agria has not provided an irrevocable undertaking to vote in favour of the Proposed Transaction. Therefore, it remains to be
seen whether Agria will vote for or against the Proposed Transaction.
Given Agria has representatives on the PGW Board, and the PGW Board has unanimously recommended the Proposed
Transaction, it would appear most likely that Agria will vote for the Proposed Transaction.
The Proposed Transaction will not proceed if Agria votes against it at the Shareholder Meeting. Equally, if Agria votes in favour
of the Proposed Transaction but other shareholders that collectively represent more than 17% to 25% of PGW’s voting rights
(depending on voter participation) reject it, the Proposed Transaction will not proceed.
9.2.2 Rural Services
If the Proposed Transaction proceeds, PGW shareholders will retain their shareholdings in Rural Services.
Excluding Seed and Grain, PGW’s remaining operations are the Retail and Water, Agency and Corporate segments of the
business. Rural Services will be a materially smaller business than PGW in its current form. The business will be less diversified
operationally and geographically, given that its operations will be entirely based in New Zealand.
Post completion of the Proposed Transaction, PGW’s market capitalisation would be materially lower and accordingly, it is less
likely to attract analyst coverage and investor interest.
We understand there is limited interdependence between Rural Services and Seed and Grain and the separation of the two
businesses is expected to be relatively straightforward. There will be agreements put in place between Seed and Grain and the
Retail business unit for Retail to continue to distribute Seed and Grain’s products throughout New Zealand, on terms similar to
those currently in place between the Seed and Grain and Rural Services segments.
The level of corporate costs allocated to the Seed and Grain business is relatively low, which further highlights the relatively
autonomous nature of the Seed and Grain business and the expected lack of impact on Rural Services from its sale.
Financial performance
The Rural Services business is projecting relatively steady financial performance between FY18 and FY19. Key points to note in
connection with the expected financial performance of Rural Services include:
• Retail and Water achieved a record EBITDA of $23.8 million in FY18, as Retail’s and Water’s contributions both improved
on the previous year. The Retail business unit continues to benefit from its technical expertise and PGW’s strategy to
invest in Agritrade. Management expects modest earnings growth to be achieved in FY19, through the continued
expansion of Retail’s key product lines and Agritrade business, and via Water’s broader service offering which is designed
to stabilise its earnings.
• Agency delivered a record EBITDA of $20.1 million in FY18, up 12% on the FY17 result. The Livestock unit performed well
due to consistently strong sheep and beef prices, and the Wool business unit recovered as underlying wool prices

Page 49

improved and sales volumes increased. New Zealand’s rural real estate market softened during FY18, which made trading
conditions difficult for the Real Estate unit. Management has forecast lower earnings for the Agency segment in FY19.
• In FY18, more than $20 million of annual corporate costs related to shared services and these expenses were allocated
across to PGW’s core operating segments (Seed and Grain, Retail and Water and Agency). At an EBITDA level, this left
approximately $10 million of overheads within the Corporate segment, which are costs related to head office and
governance functions. This level of corporate cost is relatively high for what would be a reduced Rural Services business.
We understand that PGW Management will review the support and governance costs, should the Proposed Transaction
proceed, with the objective of reducing costs to the appropriate level to reflect the structure and size of the remaining
Rural Services business.
Financial position
A post-transaction balance sheet for Rural Services is shown below, which includes adjustments for the Seed and Grain sale
proceeds and planned uses of the capital.
Table 9.2.2: Rural Services balance sheet summary
30-Jun-18 Consol. Proposed Transaction Adjustments
Rural
Services
NZD millions Pro forma*
Price
adjustment
S&G
sale
Capital
return**
Debt
repay
Pro forma
Trade and other receivables 173.8



173.8
Inventory and WIP 78.2



78.2
Trade and other payables (109.6)



(109.6)
Accruals and provisions (51.9)



(51.9)
Other working capital (6.7)



(1.5) (8.2)
Net working capital 83.8

– – (1.5) 82.3
Property, plant and equipment 46.2



46.2
Investments 286.0 (6.9) (277.9)

1.2
Intangible assets 12.0



12.0
Deferred tax asset/(liability) 12.5



12.5
Other non-current assets/(liabilities) (18.9)



24.7 5.8
Long-term net operating assets 337.8 (6.9) (277.9) – 24.7 77.7
Cash and cash equivalents 2.7

413.0 (292.0) (123.7) –
Overdraft and short-term debt (9.2)



(9.2)
Long-term debt (118.0)



100.5 (17.5)
Defined benefit superannuation scheme provision (9.5)



(9.5)
Net cash/(debt) (134.1) 413.0 (292.0) (23.2) (36.2)
Net assets 287.5 (6.9) 135.1 (292.0) – 123.7
* Consolidated balance sheet presents the net book value of Seed and Grain as part of Investments
** PGW may make a capital return to shareholders, up to a maximum of $292 million
Source: PGW Management
Following the Proposed Transaction, PGW may potentially make a tax-free cash distribution to shareholders of up to $292
million of available subscribed capital (subject to a favourable binding ruling from the IRD) and use the remaining proceeds
from the divestment to pay down debt.
The final composition of Rural Services’ balance sheet will not be known until PGW determines the quantum of funds to be
returned to shareholders and to pay down debt. However, it would appear likely that the balance sheet will be de-risked to
some degree with materially lower levels of debt than currently in place for PGW.

Page 50

9.2.3 If the Proposed Transaction does not proceed
If the Proposed Transaction does not occur, PGW shareholders will retain their shareholdings in the PGW business, which
would include Seed and Grain.
The status quo leaves PGW as a diversified rural-servicing business and its prospects are largely unchanged from the position
it was in prior to the announcement of the Proposed Transaction. Those prospects are relatively sound with consistent levels of
profitability and manageable debt levels.
PGW has been undertaking a strategic review throughout 2018 and through that process had identified a number of potential
transactions involving the sale of all or part of PGW’s business. Therefore, it is entirely possible that should the Proposed
Transaction not proceed, an alternative transaction could eventuate and potentially be put to shareholders for approval. As at
the date of this report, there is no firm alternative proposal that is capable of acceptance by the PGW Board. Given the scope
of the strategic review and the range of proposals considered to date, it would be reasonable to assume that any alternative
transaction that could eventuate may be on less favourable terms than the Proposed Transaction currently being considered
by PGW shareholders.
In the absence of any other factors, we consider there is a prospect that PGW’s share price may recede from levels observed
following the announcement of the Proposed Transaction unless an alternative transaction were to eventuate. It is likely that
the current share price observed for PGW has been affected by the control premium that is expected to be achieved from
selling the Seed and Grain segment.
9.2.4 Likelihood of a superior alternative transaction
As noted, PGW has been undertaking a strategic review throughout 2018. The Directors of PGW appointed Australasian and
global investment banks to canvass interest for various transactions involving the sale of all or part of PGW’s business. It is
likely that any superior alternative transaction that could eventuate to acquire PGW would have presented itself during that
process. There is always potential for a superior alternative transaction to eventuate, although in these circumstances that
would appear less likely.

Page 51

Appendix 1: Sources of Information
Documents Relied Upon
Key information that was used and relied upon, without independent verification, in preparing this report includes the
following:
• PGW annual reports
• PGW management accounts
• PGW FY19 revised forecast and indicative forecast for FY20 to FY23
• PGW management presentations
• PGW share register as at 31 August 2018
• PWC vendor due diligence (VDD) report
• OECD-FAO Agricultural Outlook 2018-2027
• Statistics New Zealand website (www.stats.govt.nz)
• Fonterra website (www.fonterra.com)
• Beef + Lamb New Zealand website (https://beeflambnz.com)
• Rabobank Rural Confidence Survey (media release on 5 July 2018)
• REINZ Rural Press Release (24 September 2018)
• Capital IQ
• Mergermarket
We have also had discussions with PGW Management in relation to the nature of PGW’s business operations and the known
risks and opportunities for the foreseeable future.
Reliance Upon Information
In forming our opinion, we have relied upon and assumed, without independent verification, the accuracy and completeness of
all information that was available from public sources and all information that was furnished to us by PGW and its advisers. We
have no reason to believe any material facts have been withheld.
We have evaluated that information through analysis, enquiry and examination for the purposes of forming our opinion, but we
have not verified the accuracy or completeness of any such information. We have not carried out any form of due diligence or
audited the accounting or other records of PGW. We do not warrant that our enquiries would reveal any matter that an audit,
due diligence review or extensive examination might disclose.

Page 52

Appendix 2: Qualifications and Declarations
Qualifications
KordaMentha is an independent New Zealand Chartered Accounting practice, internationally affiliated with the KordaMentha
group. The firm has established its name nationally through its provision of professional financial consultancy services with a
corporate advisory and insolvency emphasis, and because it has no business advisory, audit or tax divisions, avoids any
potential conflicts of interest which may otherwise arise. This places the firm in a position to act as an independent adviser and
prepare independent reports.
The persons responsible for preparing and issuing this report are Grant Graham (BCom, CA); Shane Bongard (BCom (Hons));
and Hamish Don (BCom (Hons)). All have significant experience in providing corporate finance advice on mergers, acquisitions
and divestments, advising on the value of shares and undertaking financial investigations.
Disclaimers
It is not intended that this report should be used or relied upon for any purpose other than as an expression of KordaMentha’s
opinion as to merits of the Proposed Transaction. KordaMentha expressly disclaims any liability to any PGW security holder that
relies or purports to rely on the Report for any other purpose and to any other party who relies or purports to rely on the Report
for any purpose.
This report has been prepared by KordaMentha with care and diligence and the statements and opinions given by
KordaMentha in this report are given in good faith and in the belief on reasonable grounds that such statements and opinions
are correct and not misleading. However, no responsibility is accepted by KordaMentha or any of its officers or employees for
errors or omissions however arising (including as a result of negligence) in the preparation of this report, provided that this
shall not absolve KordaMentha from liability arising from an opinion expressed recklessly or in bad faith.
Indemnity
PGW has agreed that, to the extent permitted by law, it will indemnify KordaMentha and its partners, employees and officers in
respect of any liability suffered or incurred as a result of, or in connection with, the preparation of this report. This indemnity
does not apply in respect of any negligence, misconduct or breach of law. PGW has also agreed to indemnify KordaMentha and
its partners, employees and officers for time incurred and any costs in relation to any inquiry or proceeding initiated by any
person except where KordaMentha or its partners, employees and officers are guilty of negligence, misconduct or breach of
law in which case KordaMentha shall reimburse such costs.
Independence
KordaMentha does not have at the date of this report, and has not had, any shareholding in, or other relationship, or conflict of
interest with PGW that could affect its ability to provide an unbiased opinion in relation to this transaction. KordaMentha will
receive a fee for the preparation of this report. This fee is not contingent on the success or implementation of the Proposed
Transaction or any transaction complementary to it. KordaMentha has no direct or indirect pecuniary interest or other interest
in this transaction. We note for completeness that a draft of this report was provided to PGW and its advisers, solely for the
purpose of verifying the factual matters contained in the Report. While minor changes were made to the drafting, no material
alteration to any part of the substance of this report, including the methodology or conclusions, were made as a result of
issuing the draft.
Consent
KordaMentha consents to the issuing of this report, in the form and context in which it is included, in the information to be sent
to PGW shareholders. Neither the whole nor any part of this report, nor any reference thereto may be included in any other
document without the prior written consent of KordaMentha as to the form and context in which it appears.

Page 53

Appendix 3: Valuation Methodologies
There are four methodologies commonly used for valuing businesses:
• Discounted Cash Flow (DCF) analysis;
• Capitalisation of earnings;
• Estimate of proceeds from an orderly realisation of assets; and
• Industry rules of thumb.
Each of these valuation methodologies is appropriate in different circumstances. A key factor in determining which
methodology is appropriate is the actual practice commonly adopted by purchasers of the type of businesses involved.
Discounted Cash Flow
It is a fundamental principle that the value of an asset or business is represented by its expected future cash flows, discounted
to present value at a rate which reflects the risk inherent in those cash flows. This approach, referred to as the DCF
methodology, is particularly suited to situations where a business is in a growth phase or requires significant additional
investment to achieve its projected earnings.
The DCF methodology requires considerable judgement in estimating future cash flows and the valuer generally places
significant reliance on medium to long-term projections prepared by management. The DCF valuation methodology can also be
very sensitive to changes in underlying assumptions. Notwithstanding these limitations, DCF valuations are appropriate where
current earnings are not representative of reasonable expectations of future earnings.
Capitalisation of Earnings
The capitalisation of earnings methodology requires an assessment of the maintainable earnings of the business and the
selection of an appropriate capitalisation rate, or earnings multiple. This methodology is most appropriate where there is a long
history of relatively stable returns and capital expenditure requirements are neither large nor irregular. In practice, it is often
difficult to obtain accurate forecasts of future cash flows and therefore the capitalisation of earnings methodology is often
used as a surrogate for the DCF methodology.
Realisation of Assets
The realisation of assets approach is based on an estimate of the proceeds from an orderly sale of assets. This methodology is
more commonly applied to businesses that are not going concerns. The valuation result reflects liquidation values and typically
attributes no value to any goodwill associated with ongoing trading.
Industry Rules of Thumb
In some industries, businesses are valued using well established ‘rules of thumb’. Generally, these rules of thumb are used as
a cross-check for other valuation methodologies.

Page 54

Appendix 4: Valuation Evidence
Comparable Companies
Table A4.1 shows earnings multiples for publicly-listed companies that specialise in the provision of products and services to
customers in the agricultural sector. Descriptions of the comparable companies follow the table.
Table A4.1: Comparable listed companies
Company Country
Enterprise
Value
(NZD millions)*
FY18
EBITDA
Margin
FY18
EBIT
Margin
EBITDA Multiples EBIT Multiples
FY18 FY19 FY18 FY19
Australasian Companies



Ruralco Holdings
Australia 465 4% 3% 6.3x 5.8x 7.8x 7.1x
Elders
Australia 853 5% 4% 10.3x 9.0x 10.9x 9.6x
Nufarm
Australia 3,340 12% 8% 8.2x 5.9x 11.7x 8.3x
Ridley Corporation
Australia 515 6% 4% 8.8x 8.0x 13.3x 11.5x
Lindsay Australia
Australia 247 10% 5% 6.2x 5.8x 13.9x 12.5x
GrainCorp
Australia 3,438 6% 2% 12.9x 11.5x 32.8x 25.4x
Skellerup Holdings
NZ 438 19% 16% 9.6x 8.6x 11.5x 10.1x
Scales Corporation
NZ 709 17% 14% 10.2x 10.1x 12.6x 12.3x
Australasian Median 8% 4% 9.2x 8.3x 12.2x 10.8x
International Companies



Bunge
USA 25,650 4% 3% 9.0x 8.9x 13.3x 13.2x
Olam International
Singapore 17,418 5% 4% 11.5x 11.1x 15.5x 14.7x
China Agri-Industries Holdings
China 5,053 4% 2% 7.8x 7.2x 10.7x 9.9x
The Andersons, Inc.
USA 2,303 5% 2% 10.6x 9.4x 26.5x 18.2x
AGT Food and Ingredients
Canada 1,218 4% 2% 14.9x 10.3x 30.7x 16.1x
Wynnstay Group
UK 193 3% 2% 9.1x 8.8x 11.5x 11.0x
ADM Company
USA 44,638 5% 3% 10.2x 9.8x 13.9x 12.8x
Camil Alimentos S.A.
Brazil 1,167 10% 8% 6.5x 6.1x 8.0x 6.9x
International Median 5% 3% 9.7x 9.2x 13.6x 13.0x
* Enterprise value figures have been translated to New Zealand dollars using exchange rates on 23 August 2018
Source: Capital IQ and KordaMentha estimates
Ruralco Holdings Limited
Ruralco Holdings Limited sells and markets a broad range of merchandise, fertilisers, water products, grain products and
financial-services products to rural customers in Australia. Ruralco Holdings is based in Macquarie Park, Australia.
Elders Limited
Elders Limited provides livestock, real estate, grain marketing, wool agency and financial-services products to rural and
regional customers, primarily in Australia. It also offers rural farm inputs such as seeds, fertilisers, agricultural chemicals,
animal-health products and general rural merchandise, as well as professional production and cropping advisory services.
Elders was founded in 1839 and is headquartered in Adelaide, Australia.
Nufarm Limited
Nufarm Limited, together with its subsidiaries, manufactures and sells crop-protection products in Australia, New Zealand,
Asia, Europe, North America, Latin America and internationally. It also provides seeds and seed-treatment products and
engages in croplands-equipment business. Nufarm is headquartered in Laverton North, Australia.
Ridley Corporation Limited
Ridley Corporation Limited, together with its subsidiaries, provides animal nutrition solutions throughout Australasia and is
involved in the sale of residual properties. It primarily offers its products under the Barastoc, Rumevite, Cobber and Primo
brands, providing them to food producers, laboratory animals and the equine and canine markets. Ridley Corporation was
founded in 1987 and is headquartered in Melbourne, Australia.

Page 55

Lindsay Australia Limited
Lindsay Australia Limited provides transport, logistics and rural-supply services to the food processing, food services, fresh
produce, rural and horticultural sectors in Australia. Its Rural segment sells and distributes a range of agricultural supply
products. Lindsay Australia is headquartered in Acacia Ridge, Australia.

GrainCorp Limited
GrainCorp Limited operates as a food ingredients and agribusiness company. It works with grain, malt, oilseed and other bulk
commodities and has operations in Australia, New Zealand, Asia, North America, the United Kingdom and Europe. GrainCorp
was founded in 1916 and is based in Sydney, Australia.

Skellerup Holdings Limited
Skellerup Holdings Limited manufactures, markets and distributes technical polymer products and vacuum pumps for various
specialist industrial and agricultural applications. It operates both in New Zealand and internationally. Skellerup Holdings was
founded in 1910 and is headquartered in Auckland, New Zealand.

Scales Corporation Limited
Scales Corporation Limited engages in agribusiness activities in New Zealand. It operates Horticulture, Food Ingredients and
Storage & Logistics segments and also provides insurance services. Products are exported to Asia, the Middle East, Europe,
North America and elsewhere. Scales Corporation was founded in 1897 and is headquartered in Christchurch, New Zealand.

Bunge Limited
Bunge Limited operates as an agribusiness and food company worldwide. The Agribusiness segment works with agricultural
commodities and commodity products, including oilseeds, primarily soybeans, rapeseed, canola and sunflower seeds, as well
as grain such as wheat and corn. It provides products to animal-feed manufacturers, livestock producers, wheat and corn
millers and other oilseed processors. Bunge was founded in 1818 and is headquartered in White Plains, New York.

Olam International Limited
Olam International Limited engages in the sourcing, processing, packaging and merchandising of agricultural products
worldwide. It operates in five segments and the Food Staples and Packaged Foods segment offers rice, sugar and sweeteners,
grains and animal feed, edible oils and dairy and packaged foods. Olam International was founded in 1989 and is
headquartered in Singapore.

China Agri-Industries Holdings Limited
China Agri-Industries Holdings Limited, an investment holding company, engages in the production, processing and distribution
of agricultural products in China and operates through five segments. It was incorporated in 2006 and is based in Causeway
Bay, Hong Kong.

The Andersons, Inc.
The Andersons, Inc. is an agriculture company that operates in the grain, ethanol, plant-nutrient and rail sectors in the United
States and internationally. It was founded in 1947 and is based in Maumee, Ohio.

AGT Food and Ingredients Inc.
AGT Food and Ingredients Inc. produces and exports pulses and grains, staple foods and food ingredients worldwide. It was
formerly known as Alliance Grain Traders Inc. and changed its name in October 2014. AGT Food and Ingredients was
incorporated in 2009 and is headquartered in Regina, Canada.

Wynnstay Group plc
Wynnstay Group Plc manufactures and supplies agricultural products in the United Kingdom. It trades in grains and offers
animal-nutrition products to the agricultural market, and cereal and herbage seeds and fertilisers to arable and grassland
farmers. The business also operates a retail network of 50 rural outlets and online stores, which provides specialist products to
farmers, smallholders and pet owners. Wynnstay Group was founded in 1917 and is headquartered in the United Kingdom.

Archer Daniels Midland (ADM) Company
Archer Daniels Midland (ADM) Company engages in agricultural commodities, products and ingredients in the United States
and internationally. It operates through four segments: Carbohydrate Solutions, Nutrition, Oilseeds and Origination. The
business offers oilseeds, corn, wheat, milo, oats, rice and barley, and also processes grains. ADM Company was founded in
1898 and is headquartered in Chicago, Illinois.

Camil Alimentos S.A.
Camil Alimentos S.A., together with its subsidiaries, engages in processing, producing, packing, distributing and selling rice,
beans, sugar and canned fish. It was founded in 1963 and is headquartered in São Paulo, Brazil.

Page 56

Comparable Transactions
Table A4.2 presents EBITDA and EBIT multiples for announced transactions of similar companies around the world.
Descriptions of the transactions follow the table.
Table A4.2: Comparable company transactions
Ann.
Date
Target Acquirer
Target
Location
Enterprise
Value
(NZD millions)*
Historical
EBITDA
Multiple
Historical
EBIT
Multiple
Nov-17
Sunrise Agritec Co. Yuan Longping High-tech Agriculture China 196 6.3x 6.7x
Oct-17
Bayer AG (Crop Science) BASF SE Germany 9,786 15.3x n/a
Sep-16
Beijing Origin Seed Beijing Shihui Agricultural Development China 83 5.8x 10.3x
Jun-16
Glencore (Ag Products) British Columbia Investment Management Switzerland 8,777 8.5x 11.9x
Dec-15
Tereos Internacional S.A. Tereos Participations S.A.S Brazil 3,077 8.3x n/a
Oct-15
Suba Seeds Paine Schwartz Partners Italy 131 10.4x n/a
Aug-15
Olam International Mitsubishi Corporation Singapore 17,362 9.6x 11.2x
Jul-15
Spearhead International Paine Schwartz Partners UK 533 11.8x n/a
Aug-14
Guangxi Kanghua Agricultural Zhejiang Busen Garments Co. China 733 14.8x 15.0x
Sep-13
AFGRI Limited AgriGroupe Holdings South Africa 574 10.3x 16.5x
May-13
GrainCorp ADM Company Australia 4,779 8.9x 11.3x
Feb-13
Tandou Laguna Bay Pastoral Australia 80 6.3x 7.7x
Feb-13
Padiberas Nasional Berhad Consortium of investors Malaysia 1,060 9.0x 10.4x
Dec-12
Plum Grove Mitsui & Co. Australia 94 17.0x 17.3x
Mar-12
Viterra Inc. Glencore Canada 8,893 10.4x 15.0x
Median 9.6x 11.3x
* Enterprise value figures have been translated to New Zealand dollars using exchange rates on the announcement dates
Source: Mergermarket and KordaMentha estimates
Sunrise Agritec Co. – Yuan Longping High-tech Agriculture
Yuan Longping High-tech Agriculture Co. Ltd. Has agreed to acquire a 49.45% stake in Sunrise Agritec Co. Ltd in order to
expand its crop-cultivation business. The transaction is subject to a profit-guarantee agreement for the following three years.
Sunrise Agritec Co. is based in China and engages in the production and sale of sunflower hybrid seeds.

Bayer AG (Crop Science) – BASF SE
BASF SE has entered into an agreement to acquire selected crop science businesses of Bayer AG. The assets to be acquired
include Bayer AG’s global glufosinate-ammonium non-selective herbicide business, as well as its seed businesses for key crops
in select markets such as canola hybrids in North America, oilseed rape in European markets, cotton in the Americas and
Europe, and soybean in the Americas.

Beijing Origin Seed – Beijing Shihui Agricultural Development
Beijing Shihui Agricultural Development Co. Ltd. has signed a definitive agreement to acquire Beijing Origin Seed Limited from
Origin Agritech Limited. Beijing Origin Seed is a China-based company headquartered in Beijing, which is engaged in
commercial corn-seed production and distribution. The acquisition includes all the equity interests in Beijing Origin Seeds’
subsidiaries.

Glencore (Agricultural Products) – British Columbia Investment Management
British Columbia Investment Management Corporate acquired a 9.99% stake in Glencore Agricultural Products from Glencore
plc. Glencore Agricultural Products is an integrated grain and oilseed business based in Switzerland. The transaction implied
an enterprise value for the business of US$6.25 billion.

Tereos Internacional S.A. – Tereos Participations S.A.S
Tereos Participations S.A.S acquired a 30.17% stake in Tereos Internacional S.A., a Brazil-based company engaged in cereal
and sugar production.

Suba Seeds – Paine Schwartz Partners
Paine & Partners LLC, the US-based private equity firm, acquired Suba Seeds Company in 2015. Suba Seeds is domiciled in
Italy and is involved in the production and distribution of vegetable and legume seeds. The target has a workforce of more than
200 employees.

Page 57

Olam International – Mitsubishi Corporation
In 2015, Mitsubishi Corporation acquired a 12% shareholding in Olam International Limited via private placement. Olam
International is a listed company headquartered in Singapore, which engages in the sourcing, processing, packaging and
merchandising of agricultural products. The price offered by Mitsubishi Corporation represented a 44% premium over the
closing share price one day before the transaction.

Spearhead International – Paine Schwartz Partners
Paine & Partners LLC acquired Spearhead International Limited in 2015. Spearhead International is a UK-based producer of
agricultural products. The acquisition intended to help Spearhead International capture knowledge and product synergies to
expand its vertically-integrated operations.

Guangxi Kanghua Agricultural – Zhejiang Busen Garments Co.
Zhejiang Busen Garments Co. Ltd. agreed to acquire Guangxi Kanghua Agricultural Corporation from a consortium of investors
that held 100% of the shares. Guangxi Kanghua Agricultural is an agricultural company headquartered in Guilin, China.

AFGRI Limited – AgriGroupe Holdings
AgriGroupe Holdings Proprietary Limited acquired AFGRI Limited, a diversified agri-services and food-processing company
based in South Africa. AFGRI Limited’s operations include grain management and grain marketing. The transaction was
announced in September 2013 and completed in March 2014.

GrainCorp – ADM Company
In 2013, Archer Daniels Midland (ADM) Company approached GrainCorp Limited to acquire the 80.15% shareholding it did not
already own. GrainCorp is a listed company headquartered in Australia, engaged in handling and storing grain and other bulk
commodities. The takeover was deemed to be against Australia’s national interest and was rejected by the government.

Tandou – Laguna Bay Pastoral
Laguna Bay Pastoral Company and other investors collectively acquired a 24.38% stake in Tandou Limited in 2013. Tandou is
an Australian company engaged in the business of water entitlements and water trading, as well as the production and
marketing of crops and livestock. The shareholding was sold by Guinness Peat Group Plc.

Padiberas Nasional Berhad – Consortium of investors
A consortium of private investors launched a mandatory offer to acquire a 27.43% shareholding in Padiberas Nasional Berhad,
a listed company based in Malaysia. Padiberas Nasional Berhad is involved in rice processing, distribution and seeds
production. Upon completion of the transaction, Padiberas Nasional Berhad was delisted from the Bursa Malaysia exchange.

Plum Grove – Mitsui & Co.
Mitsui & Co. Ltd. acquired a 25% stake in Plum Grove Pty Ltd., an Australian company engaged in managing and marketing
wheat and barley pools. The transaction was announced in December 2012 and completed in January 2013, and enabled
Mitsui & Co. to reinforce its grain accumulation in Australia.

Viterra Inc. – Glencore
Viterra Inc. was acquired by Glencore International plc in 2012, in a transaction approved by the boards of both companies.
Viterra Inc. is a vertically-integrated agribusiness company, headquartered in Canada, which provides ingredients to leading
global food manufacturers. The price offered by Glencore represented a 48% premium over Viterra Inc.’s closing share price
one day prior to public announcement of the transaction.

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Appendix 5: Weighted Average Cost of Capital
We have estimated the post-tax, nominal Weighted Average Cost of Capital (WACC) for Seed and Grain to be within a range of
9.3% to 9.7%.
The WACC has been determined as follows:
ED
E
R
ED
D
TRWACC
ecd



)1(

where:
• R
d
= Pre-tax cost of debt = 5.50%, based on a credit margin of 2% above the long run risk-free rate
• T
c
= Marginal corporate tax rate = 28%
• D / (D + E) = Target gearing (where E represents market capitalisation) = 28.6%, which is equivalent to 40% ‘debt to
equity’ and is based on the ratios of PGW and the comparable companies
• R
e
= Cost of equity = 11.5% to 12.0%
We have determined the cost of equity using the Brennan-Lally specification of the Capital Asset Pricing Model, which uses the
following formula:
SCRPTRRTRR
ifmeife
)]1([)1(

where:
• R
f
= Risk free rate = 3.50%, based on the yields of long-term government bonds
• T
i
= Investors’ effective tax rate on interest, dividends and capital gains = 28%
• β
a
= Asset Beta = a range of 0.85 to 0.90, based upon a review of the betas of comparable companies and broker
reports
• β
e
= Equity Beta = β
a
(1+D/E) = a range of 1.19 and 1.26
• R
m
- R
f
(1- T
i
) = Expected excess return, after investor taxes, on the market portfolio of equity investments = 7.5%
• SCRP = Specific company risk premium = 0% (we have not made an adjustment to WACC to include a SCRP)

Page 59

Appendix 6: Glossary of Key Terms and Definitions
Glossary
Term Definition
$ or NZD New Zealand dollars
A Actual
A$ Australian dollars
US$ or USD United States dollars
Agria Agria (Singapore) Pte Limited
AgroCentro Agimol Corporation S.A.
ATS Ashburton Trading Society
CAGR Compound annual growth rate
Capex Capital expenditure
DCF Discounted Cash Flow
DLF Seeds DLF Seeds A/S
EBIT Earnings before interest and tax
EBITDA Earnings before interest, tax, depreciation and amortisation
F Forecast
FAO Food and Agriculture Organisation of the United Nations
Fertimas Fertimas S.A.
FTE Full time equivalent staff
FY Financial year
IP Intellectual property
IRD Inland Revenue Department
kg Kilogram
KgMS Kilogram of milk solids
m Million
n/a Not applicable
NPAT Net profit after tax
NWC Net working capital
NZXR NZX Regulation
OIO Overseas Investment Office
PGW or the Company PGG Wrightson Limited
PGWSHL PGG Wrightson Seeds Holdings Limited
R&D Research and development
Rural Services PGG Wrightson Limited’s business excluding Seed and Grain
The Proposed Transaction Agreement to sell 100% of the shares of PGWSHL to DLF Seeds
The Report KordaMentha’s Appraisal Report to the shareholders of PGG Wrightson Limited
VDD Vendor due diligence
WACC Weighted Average Cost of Capital