Farming investors told to dig in on offer

NZ Farming Systems operation in Uruguay. Photo / Supplied

Takeover target NZ Farming Systems Uruguay is telling shareholders not to sell despite an improved offer from Singapore-based Olam International.

Olam last week increased its offer from 55c to 70c a share, valuing the NZX-listed company at $171 million.

A report from independent adviser Grant Samuel valued the company at 65c-79c a share.

But NZ Farming Systems yesterday advised shareholders to wait for more information and said it was continuing to negotiate new equity funding terms with a potential cornerstone shareholder.

"In addition, [NZ Farming Systems] is in discussion with Olam in order to obtain greater clarity around funding parameters envisaged by Olam, and Olam's intended strategy for [NZ Farming Systems] in the event that its offer is successful," the company said.

The board of NZ Farming Systems said it expected to be able to provide an update within the next week.

The Grant Samuel report said the company needed capital expenditure of US$62.6 million ($88 million) to complete its development, including US$16.8 million for irrigation and US$11.7 million for milking sheds.

Olam's offer is conditional on having more than half the voting rights and last week it had acceptances for 37 per cent.

It has said NZ Farming Systems set unrealistic operational targets and the strategy needs significant changes.

Vivek Verma, Olam managing director of coffee and dairy divisions, said Olam was not able to say exactly what the funding would be because it wanted to re-evaluate what requirements were needed given that there could be changes to the business plan.

"I don't believe that there should be any doubt about our ability to fund the growth going forward," Verma said.

Singapore-listed Olam last week posted revenue for the year ending June 30 up 21.7 per cent to S$10.5 billion ($10.9 billion), with net profit up 42.7 per cent at S$359.7 million.

"There is a bit of tension [with NZ Farming Systems] but whatever comments we've made on the performance of the company are factual and I think they agree that the performance of the company has been quite poor in the past."

Areas where the two parties agreed included the increased use of feed and the sale of some farms in the east of Uruguay, Verma said. "We are not as far apart as it appears to be on paper, there is a lot of common ground and I'm sure that if our takeover offer is successful we'll re-evaluate some of the points where we don't seem to be agreeing today and do whatever's right for the company.

"We would definitely like to look at what other information can be provided to us and to be proven wrong."

Olam would probably vote against any equity raising put to shareholders, he said.

"It does seem to be a defensive strategy by the board but obviously I don't have information and I cannot comment on their motives."

The company was not looking for a fundamental change in strategy, he said. "We are in it for dairy. We want to see what is the best possible use of the land and if there is some other land where it is better to do dairy then we'll probably look at that."

NZ Farming Systems yesterday closed up 1c at 70c.