New Zealand Farming Systems Uruguay (NZFSU) shareholders are being asked to hold on to their shares in the face of a takeover bid.
The company has received a takeover notice from Singapore-based Olam International Ltd and is compiling an independent appraisal report on the bid.


NZFSU chief financial officer Andrew Clark says shareholders will be sent the offer and related documentation this week.


Clark says NZFSU will also issue a target statement including an independent appraisal report on the merits of the offer.


“The directors recommend that shareholders await receipt of the target company statement before making any decision regarding the offer,” he says.
Olam is making a cash offer at 55cents a share for all of the shares in NZFSU that it does not already own. The offer values NZFSU at $110 million.


In September last year Olam bought a 14.35% stake in the company and increased it to 18.45% following the purchase of a further 4.1% from the receivers of Rural Portfolio Investments two months ago.


Last week it announced a lock-up agreement to buy PGG Wrightson’s 11.5% stake in NZFSU.
The deal is subject to certain conditions, including Olam achieving a minimum 50.1% shareholding in NZFSU and the approval by the Overseas Investment Office.


Olam is not a new player in the New Zealand dairy industry and owns a 25% stake in independent dairy processor, Open Country Dairy.


The global supplier of agricultural products is confident its offer for NZFSU shares will be accepted by other shareholders.


“Our offer price of 55c cash per NZFSU share represents a 38% premium over the 3-month average trading price of 40c and provides all NZFSU shareholders with the opportunity to realise a significant premium for their shares,” it says.
While Olam has the support of cornerstone shareholder PGG Wrightsons, it is unclear how the other institutional shareholders will react to the takeover offer.


PGG Wrightson chairman John Anderson says its board had supported the offer in the best interests of its shareholders.


Anderson says the sale of its equity interest in NZFSU will not impact on its close working relationship with the company over the last four years.


“We remain 100% committed to our core seeds and rural services businesses in Uruguay and the South American region which holds the promise of substantial growth on the back of productivity improvements and adoption of more intensive farming systems.


“PGW provides a range of agricultural products and services to rural customers in South America through its South American base in Uruguay, and we will continue to utilise that infrastructure to maintain an ongoing supply and advisory relationship for NZFSU.”


Anderson says Olam’s stated intention to support the capital requirements of NZFSU is good news for the company.


“We view the ongoing relationship between NZFSU and PGW as an important part of that, as PGW is an efficient supplier of farm inputs and services required by NZFSU.”
PGG Wrightson manages NZFSU as part of a management agreement.


However Clark says NZFSU is well advanced in negotiations with PGG Wrightson about internalisation of the management agreement and entering into a long-term preferred supplier agreement.


NZFSU owns 31,000ha of farmland in Uruguay, with approximately 13,000ha in dairy operation.