Shareholders have been urged not to accept a takeover offer for New Zealand Farming Systems Uruguay by a minority shareholder until after an appraisal by independent directors.
Singapore-based Olam International yesterday offered 55c a share for New Zealand Farming Systems Uruguay (NZFSU) in a takeover bid after PGG Wrightson earlier agreed to sell its 11.5% shareholding.
With its existing 18.45% shareholding, the PGG Wrightson tranche took Olam's stake to just under 30%, triggering the takeover offer.
It was conditional on Olam being able to buy at least 50% of the shares on offer.
Craigs Investment Partners broker Chris Timms said the chance to buy PGG Wrightson's stake might have been too good an opportunity for Olam to resist.
Mr Timms said it looked like a good deal for shareholders and PGG Wrightson.
NZFSU shares were trading at 41c when the New Zealand Stock Exchange opened yesterday, well off the 2007 issue price of between $1 and $1.50.
Yesterday they hit 53c, nearly a year since they last reached that level.
He said shareholders have seen little evidence of success from taking New Zealand farming technology to South America and might not be willing to wait for the promises expected from growing demand for food and dairy products.
Some opted to sell yesterday, pushing up the share price by about 30%.
Mr Timms said PGG Wrightson, which has a management agreement with NZFSU, was in discussions with the company about that agreement which could see it go in-house, but the rural servicing company looked like securing a long-term supply agreement for farm products, an area in which it has an established presence in South America.
NZFSU was established to take New Zealand farm expertise and develop dairy farms in Uruguay.
As at December 2009 it was milking 19,600 cows through 27 dairy sheds on 11,500ha.
But it has suffered from a lack of capital which delayed development of the farms and caused a cashflow shortfall.
Boosted by a $43 million bond issue and the sale of non-strategic farms, it reported an improved financial performance for the half year to the end of December of a $3.5 million loss, compared to a $7.3 million loss a year earlier.
The Olam deal values NZFSU at $134 million and increasing its stake from 18.45%, including the PGG Wrightson shares, would cost it about $110 million.
The independent appraisal is due shortly and the offer will close at 5pm on September 1.
Olam already has a presence in New Zealand food manufacturing, being the second largest shareholder in Open Country Dairy.
