A Taranaki dairy farmer who is one of the remaining minority shareholders in NZ Farming Systems Uruguay says Singapore's Olam International is not offering a high enough price to mop up the remaining 22% of the company
A Taranaki dairy farmer who is one of the remaining minority shareholders in NZ Farming Systems Uruguay (NZFSU) says that Singapore-based commodities trader Olam International not offering a high enough price to mop up the remaining 22 percent stake in the company which it does not own.
Rob Poole, of Hawera, who has visited Uruguay several times, said the offer of 70c a share did not appear to recognise a fundamental improvement in the business in Uruguay and the market generally since the previous takeover offer last September, even though land and livestock prices had improved.
Singapore-based Olam has a 78 percent stake after a takeover offer that closed last September. It is offering 70c a share for the rest of the stock, compared to a closing price of 55c on Thursday.
Under the Takeovers Code, Olam is expected to send to shareholders the offer in the next two weeks, and NZFSU will then issue a target company statement.
NZFSU today said its independent directors recommended shareholders wait for that target company statement, including an independent appraisal on the merits of the offer, before making a decision.
Mr Poole -- who controls 1.8 million of the company's 244.23m shares with Clare Poole -- said the offer was not good enough, because Uruguay had experienced the same lift in dairy prices as New Zealand and the milkprice which farmers were receiving there is comparable to the Fonterra price in NZ.
"As a consequence, dairy cow and land prices have increased," he said.
About 190 million of the company's shares are already held by Olam International. Other minority shareholders include Kevin and Diane Goble, of New Plymouth (2.5m shares); Kevin and Jaculyn Honeyfield, also of New Plymouth, (1.5m shares); Hapua Koko Forests Ltd, of Leigh, (1.35m shares); Thomas and Anne Lees, of Red Beach (1.25m shares); and Christopher and Dorothy Putt and CA Nominees (1m shares).
Mr Poole said that media reports from Uruguay in February this year quoted an 13 percent rise in land prices as a result of a number of positive factors affecting agriculture in the country. Prices for crops such as soy and milk and beef prices have all increased substantially compared with a year earlier.
At the 2010 half year NZ Farming Systems reported positive improvements in the farming operations and increased their year end financial performance forecast for the year to end of June 2011. This increase not only incorporated an increased milk price, but also a 20 percent increase in milk production.
The company increased its earnings (EBIT) forecast for the 20010/11 year by US$4.5 million at the half year.
Mr Poole said that operational performance had improved under Olam's management but 70c/share price offer did not reflect this.
The offer was being made before shareholders were informed by the full year result and annual report, which would revalue both land and livestock at balance date.
"I would expect a significant lift in both of these assets," he said.
The company had spent a lot of money on extra supplementary feed, which had led to higher in-calf rates among the cows, and in-calf dairy cows had at least twice the value of empty cows.
At June 2010 the company had a net tangible asset backing of NZ91c/share, and with a clearer path to profitability mapped out, a permanent chief executive officer in place, and a 20 percent increase in international dairy product prices: "I certainly won't be selling my shares at the 70c price being offered," said Mrs Poole.
