Olam faces rival bid for NZ Farming

Uruguay firm values NZFSU at 33.6% more than Olam's valuation of the firm

By JAMIE LEE

COMMODITIES group Olam International's takeover offer for NZ Farming Systems Uruguay (NZFSU) at NZ$0.55 per share has been upstaged by the Uruguayan-based Union Agriculture Group, which threw in a bid of NZ$0.60 per share yesterday.

Union Agriculture - which holds 1.65 per cent of NZFSU - launched a competing bid to secure control in NZFSU, which has Olam as its single-largest shareholder.

Union Agriculture's chairman Juan Sartori said in a statement to Bloomberg: 'We are content to achieve ownership of 50.1 per cent.'

'Our proposal is very compelling, both from a financial viewpoint and more importantly, from a strategic perspective.'

Union Agriculture - a privately held company formed to buy and develop prime agriculture land in Uruguay - values NZFSU at NZ$147 million (S$142 million), or 33.6 per cent higher than Olam's valuation of NZFSU.

In response, shares of NZFSU - which is listed in New Zealand - rose five cents to end at NZ$0.63 in Wellington yesterday.

Olam, which launched its NZ$110 million takeover offer last month, said yesterday it 'has received acceptances that, taken with its existing holding, represent 30 per cent' of NZFSU as at Aug 13, up from 18.45 per cent at the time of the takeover announcement. Olam's takeover offer was then a 38 per cent premium over NZFSU's three-month average trading price of NZ$0.40.

The deal is subject to Olam gaining at least 50.1 per cent of the company after the offer closes and approval by the authorities.

'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,' it said.

NZFSU is expected to release its annual results and target company statement that refer to Olam's takeover offer next Monday, Olam added.

Separately, NZFSU also stressed to shareholders not to make any decisions until the company releases its assessment of the merit of both takeover offers.

'The directors again recommend that shareholders do not sell their shares before receiving and considering further information,' NZFSU said in a regulatory filing on the New Zealand Exchange.

NZFSU's second-largest shareholder, PGG Wrightson, which holds an 11.5 per cent stake, is backing Olam's offer, Olam said in its earlier statement.

Other substantial shareholders of NZFSU include Accident Compensation Corporation and Odey Asset Management, the takeover announcement by Union Agriculture showed.

Olam earlier said that it would support NZFSU's near-term working capital requirements if its offer goes through, noting that NZFSU needs significant new capital to meet its current obligations and to develop its portfolio of farms.

By 2012, NZFSU is expected to supply one-fifth of milk produced in Uruguay, Olam has also said.

Separately, Olam said that it remains in discussion with the government of the African state of Gabon to develop a special economic zone.

The clarification follows media reports, including one by the Financial Times, saying that Olam would lead the development of this economic zone.

Olam would also be the main investor in a palm oil production project, the FT reported this week.

'The company is currently in an advanced stage of negotiations and finalisation of the binding agreements with the Government of Gabon in relation to the special economic zone project,' said Olam, but added that it was not a material transaction based on Singapore's listing rules.

Olam is still conducting feasibility studies on the palm oil project, it added.