New Zealand Farming Systems Uruguay shareholders are being advised by company directors not to sell their shares to Olam International.
Chairman John Parker said among reasons for rejecting the offer, was that New Zealand Farming Systems Uruguay (NZFSU) was in discussions with a new investor prepared to make "a significant investment of new equity" without requiring control.
"No assurance can be given that negotiations will be completed.
"Should any agreement be finalised, it would be subject to shareholder approval," Mr Parker said in a letter to shareholders.
He listed seven reasons for shareholders to reject the Olam offer, including that 55c a share was below the 60c a share counter offer from Union Agricultural Group (UAG), which was in turn below a valuation range from Grant Samuels of 65c-79c with a midpoint of 72c.
Mr Parker said other reasons to reject the takeover were that Olam's plans to change the business model were based on incorrect assumptions and would reduce NZFSU's ability to capitalise on the bright future for milk.
Shareholders have already done the "hard yards", he said, while the offer contained insufficient detail on aspects such as funding future development.
Olam's offer did not place any value on management changes proposed by NZFSU or that the investment was now considered a project of national interest by the Uruguayan Government.
Management changes will save it $NZ2 million a year in overhead costs and the national status will provide taxation benefits estimated at $28 million-$36 million in coming years, or 15.7c-20c a share.
While Olam already owned 18.5% of NZFSU and had made an offer for PGG Wrightson's 11.5%, there was no certainty it would get PGG Wrightson's tranch, he said.
For the offer to succeed it was necessary for Olam to get more than 50% of NZFSU shares.
Mr Parker expected to send details of the counter takeover offer by Uruguay-based UAG to shareholders in the coming few weeks.
