It might not be much to cling to but the prospect of two competing bidders for NZ Farming Systems Uruguay represents some progress for stalled capital markets and the wider economy.
If it is snapped up it will be a shame because the idea - transplanting Kiwi farming know-how to
a less developed country - was a good one. But it was badly timed and when the financial crisis left parent company PGG Wrightson at the mercy of the banks, a takeover was always on the cards.
It certainly isn't the only local company with owners who need to sell. But the market has been quiet because potential buyers either have troubles of their own or are smart enough to sit on their hands and wait.
For those observing the progress of the recovery at a market level, takeover action is a vital sign of life. It is part of a renewal process. In theory the unsalvageable companies are sold off freeing up capital to rejuvenate other more viable ventures. Auckland's investment banking sector will be very excited to see the process under way with such vigour in the case of NZ Farming Systems.
The downturn has been severe and it has taken a long time for things to move. Now we'll start to see more takeover plays as potential buyers realise it is time to move or miss out on the opportunities the slump has to offer.
But as offers arrive it is vital that shareholders assess the viability of companies and get a long-term view of their value. Most local stocks are undervalued right now and the last thing the market or economy needs is the kind of takeover lolly-scramble that occurred in the 90s and the first part of the previous decade.
As long as they can afford, investors need to hold tight. Unless receivers are at the door, boards should rebuff initial offers and should expect bidders to up their offers.
The NZ Farming Systems board is playing it well. It may not be able to stop a serious bidder gaining control of the company, but it can ensure that bidder is forced to pay a fair price.
