Don't sell yet, says Farming Systems

The board of NZ Farming Systems Uruguay disagrees with comments made in a takeover offer and investors should hold off selling shares, says chairman John Parker.

Singapore-listed Olam International owns 18.45 per cent of the company and has offered 55c each for all shares. The board of NZX-listed NZ Farming Systems reiterated its advice that shareholders should not sell at this time.

A target company statement would be published on August 23 containing detailed information and a recommendation from the board, Parker said.

"The offer document from Olam contains a number of comments and assertions with which your board disagrees," Parker said.

"These will also be addressed in the target company statement, along with independent commentary and valuation advice from Grant Samuel, which has been appointed independent adviser."

PGG Wrightson set up NZ Farming Systems to develop dairy farms in Uruguay and has entered into a lock-up agreement to sell its 11.5 per cent stake to Olam.

The takeover offer is conditional on having more than 50 per cent of the voting rights and consent under the Overseas Investment Act 2005.

Parker noted that the sharemarket had priced the company's shares at or above the 55c offer price since July 26.

The offer could not close before September 24 and could be extended at the discretion of Olam, he said.

"This means the offer price of 55c per share is locked in as the minimum value available to you for at least another six weeks," he said.

"Accordingly, there is no requirement for you to make any decision at this very early stage. In our opinion, your interests can only be enhanced by awaiting further information and developments."

In its offer document Olam said the 55c offer was a 37.5 per cent premium to a three-month volume-weighted average price before the offer was announced.

NZ Farming Systems had consistently failed to meet its stated targets, earnings forecasts were unlikely to be achieved and the operational strategy needed significant changes, Olam said.

The next stage of development required capital and Olam believed the company might need to call on shareholders for one or more equity capital raisings, which it would support if its takeover was successful.

NZ Farming Systems has said it needed to raise about US$60 million ($82.8 million) to complete the development of the company and that it could issue bonds in Uruguay, bring in new equity and sell dry stock farms.

Olam has said it would be happy to have a significant Kiwi shareholding in the company.

NZ Farming Systems' shares closed steady yesterday at 55c.