Agria Corporation (NYSE: GRO) really pulled off a “Very Smart Divestiture” move this month that has resulted in a 112% gain in share valuation. That’s right; 112% during last month. That’s got to be a record for last month or something...
In a brief nutshell… Four months ago China based Agria Corporation (NYSE: GRO) through Agria Asia increased its stake in New Zealand based agri-business PGG Wrightson, New Zealand's largest agricultural services company, to 51% and part of the deal was the inclusion of the Wrightson Finance unit. Now… PGG Wrightson has sold its Wrightson Finance unit for $84.7 million, to agri-business Heartland New Zealand, with the understanding that Heartland, through its new asset, formerly Wrightson Finance, will offer financial services and products to the agri-clients of PGG Wrightson and PGG Wrightson will in turn make referrals to Heartland from its network of farmer clients. Clear as mud? (as we used to say in Media Relations).
The aim here was to free up PGG Wrightson from its financing business and allow it to focus on its two primary businesses of agri-services and agri-tech and substantially reduce the level of debt on its balance sheet both from the debt in Wrightson Finance being passed to Heartland and from the consideration received by PGG Wrightson. The 51% owned by Agria Corporation (NYSE: GRO) is now, in essence, less encumbered by subsidiary debt. Much clearer…
So the stock in August dropped from $1 to $0.65, and after the deal, surged to its current $1.38, which. Without quibbling, is where it was trading in early April. So the question looms: can the stock hold onto the top of this surge; establish a ‘bottom’ around $1.40? I don’t know.
There are some strong signals it could: China farming has become less volatile recently, there are virtually no short sellers of Agria Corporation (NYSE: GRO) to apply any downward pressure, and it does have positive EPS projections quarter over quarter.
I haven’t, don’t, and do not intend on holding any of the companies mentioned in this article