Olam's 70c wins Uruguay dairy firm

Olam managing director of coffee and dairy divisions Vivek Verma. Photo / Steven McNicholl

Singapore-based Olam International has successfully gained control of NZX-listed NZ Farming Systems Uruguay with four days to run on its takeover bid.

Olam has offered 70c a share for all shares, valuing NZ Farming Systems at $171 million, conditional on getting more than half the shares.

In a notice to the stock market yesterday, Olam said it had reached 50.1 per cent of shares and that its offer had been declared unconditional.

"Olam believes that the strong support for the offer from [NZ Farming Systems] shareholders is a reflection of the full price being offered, and also the current financial position of [NZ Farming Systems] which requires shareholders to contribute significant new equity capital," Olam said.

"The acquisition of [NZ Farming Systems] is consistent with Olam's dairy products strategy, which includes participation in dairy farming in low cost origins that will strengthen its market position in the dairy industry."

NZ Farming Systems was set up by rural services company PGG Wrightson to develop dairy farms in Uruguay.

In its takeover offer Olam said the company had consistently failed to meet its targets, earnings forecasts were unlikely to be achieved and the operational strategy needed major changes.

However, Olam managing director of coffee and dairy divisions Vivek Verma has said the company was not looking for a fundamental change in strategy.

"We are in it for dairy," Verma said.

Olam said it needed to be in a position of control with 50.1 per cent to influence the future direction of the company but would also be happy to have a significant Kiwi shareholding.

An independent adviser's report by Grant Samuel valued NZ Farming Systems at 65c to 79c a share. Its shares closed up 1c yesterday at 70c, having previously traded at a high and low during the past year of 73c and 37c.

The Grant Samuel report said NZ Farming Systems needed capital expenditure of US$62.6 million to complete its development, including US$16.8 million for irrigation and US$11.7 million for milking sheds.

The company produced 68 million litres of milk in the year ended June 30, with 31 milking sheds and 55,000 livestock at the end of the period.

The board of NZ Farming Systems has recommended shareholders accept the offer for at least part of their shareholding and said Olam had the financial capacity and resources to support growth through to the completion of farm development.

The Olam offer closes at 5pm this Friday.