Singapore company Olam International has sent its formal takeover bid to New Zealand Farming Systems Uruguay investors.
It is urging shareholders to accept its bid, saying the New Zealand Farming Systems Uruguay has a history of underperforming, is unlikely to achieve its own earnings forecasts and has run out of cash.
Olam International already owns 18.5% of the company and has the support of fellow shareholder PGG Wrightson, effectively giving it a 30% stake.
The Singapore-based company says its bid of 55 cents a share is a third higher than the rural services firm's normal share price. Analysts, however, say the offer is well below Farming Systems' market value.
Olam criticised Farming Systems for setting itself unrealistic operational and financial targets, and says the firm needs significant capital, which it can offer because it has $416 million cash in the bank.
Olam is content to get just over half of Farming Systems, and warns if its bid is successful, it may need to call on shareholders to support one or more capital raisings to ensure the company's growth.
In response, the chairman of Farming Systems Uruguay, John Parker, urges investors not to sell their shares until they have read the appraisal report it has commissioned on the bid.
Mr Parker says that report and the independent director's views on the bid will be released on 23 August, the same day Farming Systems' full year result comes out.
He says the company will hold a briefing for investors in Auckland that day to discuss the offer.