Olam commits funds for Farming Systems development

Olam to provide funds for Farming Systems’ US$60M farm development

By Paul McBeth

Sept.10 (BusinessDesk) – NZ Farming Systems Uruguay Ltd. says it will use short-term funding from Olam International Ltd. to complete the development of its existing farms as part of the takeover deal.

The Singaporean food and commodities group, which is looking to buy at least half of Farming Systems at 70 cents a share, committed to securing a short-term credit facility for the farm manager, according to a letter to chairman John Parker released to the stock exchange. Olam said it will develop a long-term funding strategy, though its initial view is that the cash should be raised in a pro-rata rights issue, as opposed to taking on more debt.

“NZS requires approximately US$60 million to complete development of its existing farms, and Olam’s view was that development should be advanced so as not to prejudice future productivity and profitability,” Farming Systems said.

Olam upped its price to 70 cents a share from 55 cents after Uruguay’s Union Agriculture Group put in a rival bid, while Farming Systems sought a capital injection from a third party. UAG subsequently dropped out of the race, and Farming Systems has stopped its negotiation with the other group. The Singaporean company has 40.26%.

Farming Systems’ board initially knocked back Olam’s proposal, but after the increased offer and commitment short-term funding and the company’s South American strategy, gave an endorsement for shareholders to sell part of their investment.

As a condition of the endorsement, Olam told Farming Systems’ lender it didn’t object to the sale of the Don Pepe farm property, a requirement to secure its release from bank security.

The shares were unchanged at 69 cents on the NZX today.

(BusinessDesk)