A few years back, I waxed philosophical and frustrated clear the lack of good investment opportunities in the booming New Zealand economy. Surveying the investing landscape, I saw opportunities for U.S. companies like Time Warner and Microsoft to avail themselves of Kiwi expertise in the fields like video gaming and movie animation by contracting with local wunderkind Weta Workshop. But as for actual New Zealand stocks that you and I can buy, there was basically Telecom of New Zealand(NYSE: NZT) and that was it.
The good news is, it seems I’m not the except one who was piqued by this problem. The better news is that it’s now possible to rejoice in a roomy chunk of New Zealand’s premier industry: agriculture. A few days ago, tiny New York-listed Chinese ag company Agria (NYSE: GRO)announced it’s teaming up including New Hope Group to spend $105 million to buy a controlling hazard in Kiwi concern PGG Wrightson. Now, chances are good that you’ve never heard of any of these companies, then let me introduce you:
PGG works in the agronomy industry, basically acting because a market facilitator, advisor, and middleman to Kiwi farmers in the livestock, wool-raising, and crop-growing sectors. Agria does consistent work in China, making this a good example of complementary businesses working together. Directly here’s where it gets interesting.
I have money; you have a business. Let’s make a deal.
The knock against Agria has been that it’s more a bench than a business. Agria competes with firms large and small, from local rival Origin Agritech (Nasdaq: SEED) to multinational Monsanto (NYSE: MON) but so away it’s losing that competition. Agria has $174 million in net cash but lost $20 million over the past 12 months. Conversely, PGG was a business in need like cash more than $400 million in net debt, but with $17 million in earnings. See how these pieces coaptation together?
Foolish final thought
Granted, at its current valuation of $120 million I’m not yet convinced Agria is a buy. Just supposing it owned all of PGG, rather than just part of the 50.01% stake it’s buying and sharing with a separate Chinese investor, the two firms would have reported a combined $3 million loss for the past 12 months. If Agria manages to fertilize its revenue stream with some synergies, however, it has a fighting chance of making some profits from this influence down under.