NZFSU 'now recommends' Olam bid

Directors of listed-New Zealand Farming Systems Uruguay have switched to recommending shareholders sell part of their stakes to allow Singapore-based Olam take a cornerstone 50.1% stake in the offshore dairying company.

Olam appears to be the only party still in the hunt to take over or at least gain a controlling interest in NZFSU.

The offer values the company at about $170 million.

NZFSU has established dairy farms with 31 milking sheds in Uruguay, but hit hard times because of adverse climatic conditions until recently.

Olam gained Overseas Investment Office approval a week ago and saw off Uruguay-based Union Agriculture's takeover bid by increasing its initial bid 27%, from 55c to 70c per share.

Shares subsequently spiked as the competitive offers went through 55c and 60c to Olam's present 70c and were trading down from 72c around 70c yesterday.

Olam, which holds a 37% stake, has said it can provide the funding certainty required by NZFSU to support its capital needs.

Craigs Investment Partners broker Chris Timms said NZFSU's directors appeared placated by Olam offering up a cash injection for the Uruguayan farms, having the resources for growth and the ability to assist completing the company's development programme.

In a statement to shareholders through the markets, NZFSU directors said considering Olam's increased offer to 70c, assurances of future capital raising and farming operations, the board "now recommends shareholders accept the Olam offer in respect of at least part of their shareholding ... to ensure Olam secures the minimum 50.1% required".