Olam weighs Farming Systems counter-bid

Monday 16th August 2010

Olam International, trumped in its takeover offer for NZ Farming Systems Uruguay, plans to wait for the target company’s annual results and an independent assessment of its offer before responding.

Union Agriculture, a Uruguayan private entity formed to develop prime agriculture land, today offered 60 cents a share cash for Farming Systems, topping Olam’s offer of 55cents.

The shares climbed 8.6% to 63 cents today, suggesting investors are betting Olam will sweeten its offer.

“Olam will review NZFSU’s annual results and the target company statement, including the independent appraiser’s report prior to determining its future course of action,” the Singapore-based food group said today.

Farming Systems is expected to release its results and response to the Olam offer on August 23.

Olam said today that acceptances of its offer had lifted its interest in Farming Systems to 30%.

Union Agriculture currently owns 1.7% of the Uruguayan dairying operation. Farming Systems’ board advised shareholders not to sell until they receive target company statements and independent appraisals of both offers.

Olam owns 18.5% of Farming Systems and has already entered into an agreement to buy out PGG Wrightson Ltd.’s 11.5% stake for $15.5 million.

The Farming Systems board previously urged investors not to sell their stock to Olam, saying it disagreed with some assertions made by the would-be buyer, and will address these when it releases its target company statement and independent advisor’s report along with its earnings on August 23.

The buy-out offer holds the prospect of much-needed capital for Farming Systems, whose development and expansion of dairy farms in Uruguay was curbed when the global financial crisis froze credit markets.

Since then it has faced unfavourable weather, including drought, which has sapped production and raised questions about the wisdom of some of its land purchases.

The potential acquisition of Farming Systems was made more attractive last week with the announcement that it has gained tax benefits with an estimated current value of between US$20-US$25 million from the Uruguayan government for its extensive investments in the country.

Union Agriculture has been active in Uruguay for more than 30 years, and started acquiring land in 2005 in order to develop its own properties. Initial focus was into niche activities like blueberries, olives and honey with a second stage of getting into big scale animal and grains production.

Businesswire.co.nz

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