Olam International's offer to mop up shares of NZ Farming Systems Uruguay it doesn't already own has merit, though shifts in dairy prices and the exchange rate will change the playing field.
Grant Samuel's independent report found the Singaporean food commodities group's 70 cents-a-share offer for the remaining shares is above its 60 cents-to- 69 cents valuation range.
Farming Systems' independent directors have supporting the proposal on the basis of the report.
The value is reliant on Olam's forecast milk price, which would increase by 8 cents a share, based on a 1 US cent per litre increase in the long-run estimate.
The report also said New Zealand's exchange rate is at an all-time high against the greenback, and had it stayed constant, the valuation range would be 68 cents and 77 cents.
"In this regard, the timing of the Olam offer could be seen to be opportunistic," the report said.
Last week, Farming Systems said it expects a smaller operating loss than forecast this financial year, and had arranged a US$30 million bank loan to fund working capital.
If Olam secures the remaining 12 per cent of Farming Systems it needs, it will delist the company from the NZX and sever all ties with New Zealand.
If it doesn't win the minimum 90 per cent to force a compulsory takeover, it will probably undertake a fully-underwritten rights issue to raise between US$110 million and $115 million in the second half of the year.
The shares were unchanged at the offer price of 70 cents in trading today, and have gained 13 per cent this year.