New Zealand Farming Systems Uruguay - subject of a $37.6 million takeover offer which ends today - has dragged itself from loss to profit, thanks to higher-than-expected US milk prices.
The profit turnaround of $US4.8 million ($NZ5.9 million) - from a loss of $US1.9 million to profit of $US2.9 million, appears to underpin the stance taken by some minority hold-out shareholders unwilling to sell at 70c.
The takeover offer by Singaporean commodities giant Olam International, which had been extended by a fortnight, was attempting to clinch 100% ownership of New Zealand Farming Systems Uruguay (NZFSU).
The bid appears to have fallen short, as Olam needs 90% acceptances to trigger full 100% compulsory acquisition but as of yesterday it had fallen short by almost 5%.
A block of shareholders representing about 10% of shares has resisted the 70c per share offer, which Olam has said it will not increase.
The shareholders believe NZFSU's value is more than the 70c on the table, citing a recent Uruguayan farm sale about 25% above valuation.
In a note to markets yesterday, Olam said in its draft budget forecasts, which it is finalising for its 2011-12 trading year, NZFSU's earnings before interest and tax had been upgraded from the previous forecast of $US3.3 million to $US8.9 million. Its after-tax profit had subsequently been upgraded from a $US1.9 million loss to $US2.9 million.
Craigs Investment Partners broker Peter McIntyre said the turnaround from forecast loss to profit was "a big move', which reinforced the reasoning behind the block of investors who did not want to sell at 70c per share.
Olam has recently cautioned shareholders NZFSU requires up to $US115 million more in development funding.
• In September last year, Olam gained a 78% stake in NZFSU, which to that point had successfully set up 16 New Zealand-style dairy farms in Uruguay. However, large land purchases and consecutive financial losses of almost $38 million had left it short of an estimated $88 million it needed to convert a further 49 properties.
