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UPDATED: Union Agriculture Group makes play for Framing Systems

Monday 16th August 2010

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Union Agriculture Group (UAG), a Uruguayan private entity formed to develop prime agriculture land, has made a counter-offer to Singaporean investors Olam International for NZ Farming Systems Ururguay. 

The UAG bid offers 60 cents per Farming Systems share in a full-cash offer. UAG currently owns 1.7% of the Uruguayan dairying operation. 

The offer trumps 18.45% shareholder Olam International's offer of 55 cents per share. The Singaporean company has already entered into an agreement to buy out PGG Wrightson's 11.5% stake for $15.5 million. 

The Farming Systems board had previously urged investors not to sell their stock to Olam, saying it disagreed with some assertions made by the would-be buyer, and will address these when it releases its target company statement and independent advisor's report along with its earnings on August 23. 

The buy-out offer holds the prospect of much-needed capital for Farming Systems, whose development and expansion of dairy farms in Uruguay was curbed when the global financial crisis froze credit markets.

Since then it has faced unfavourable weather, including drought, which has sapped production and raised questions about the wisdom of some of its land purchases. 

The potential acquisition of Farming Systems sweetened last week with the announcement that it has gained tax benefits with an estimated current value of between US$20-US$25 million by the Uruguayan government for its extensive investments in the country. 

UAG has been active in Uruguay for more than 30 years and started acquiring land in 2005 in order to develop its own properties. Initial focus was into niche activities like blueberries, olives and honey with a second stage of getting into big scale animal and grains production. 

Farming System's shares were last trading 3.5% up at 60 cents a share. 

The offer closes on October 29.

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