Wednesday, July 6, 2022

Brook questions NZS use of concentrates

Departing shareholder Barry Brook has questioned the high costs level of concentrates fed to the New Zealand Farming Systems Uruguay (NZ) dairy herd.

Brook: Took 75c a share offered by Olam.

This cost was one in a mix of factors why the company had not met its financial targets, he said after accepting the Olam International takeover offer for his shares.

“With concentrates and other feeds, they’re doing between one third and one half of the total feed depending on the time of year and I would rather be looking at a 15% to 20% ratio, with the balance from pasture.’’

Brook was involved in the setting up of NZS during his time at PGG Wrightson, and had “mixed feelings’’ about the company being lost to New Zealand investors. “It’s been an interesting journey and it would have been nice to see it through to a steady state to see what it was capable of.’’

With his concern over feeding costs and Olam so close to the 90% ownership level where it could compulsorily acquire the balance of shares, Brook said he decided he had other uses for his funds and the 75c a share takeover price was a good opportunity to exit.

Singapore-based Olam has now reached 90% and it is just a matter of time before it takes out all minority shareholders and delists the company from the NZX. The takeover will be completed without minorities being put to the test with a substantial capital raising through a rights issue.

Rob Poole, the biggest of the minority shareholders and one of the company’s independent directors, has also accepted the Olam offer.

The independent directors recommended shareholders accept the offer, which had been lodged with Olam already owning just over 86% of the shares.

Poole had led opposition to two previous takeover bids by Olam before being elected to the board.

He thought at the time of the 2011 takeover offer that NZS would be able to meet its financial targets in the 2012 year and that this would lead to a gain in the share price. This hadn’t eventuated and he now accepted an independent adviser’s valuation of the shares at between 52c and 65c.

“I’m confident the company will be successful but it will take longer than I anticipated and longer than Olam thought. Farming is a long term investment and there is a lot of work to do for the company to get there.

“I’ve lost money on the investment, but you face reality and move on.’’

From what he had heard, most of the minority shareholders were unlikely to have contributed to the capital raising, and certainly not enough to prevent Olam reaching 90% ownership, Poole said.

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