Olam, new owner of Farming Systems, surges on merger talks

NZ Farming Systems Uruguay. Photo / Supplied

Olam International Ltd., the owner of 67 per cent of NZ Farming Systems Uruguay, surged on the Singapore stock exchange after confirming it is in talks with rival Louis Dreyfus Commodities.

Olam "has engaged in preliminary confidential discussions with Louis Dreyfus in relation to a possible business collaboration which may take the form of, among others, a merger," the global supplier of food and agricultural commodities said in a statement. The talks are "preliminary" and there's no certainty a deal will be done, it said.

Shares of Olam jumped 8.5% to S$3.20 on the Singapore stock exchange and have climbed 22% in the past 12 months. The shares are rated 'outperform' based on the consensus of 17 recommendations compiled by Reuters.

Olam's New Zealand investments include a stake in Open Country Dairy, which buys regulated milk from Fonterra Cooperative Group though its entire local exposure is a minor part of a business that supplies commodities including cocoa, coffee, rice and cotton in 64 countries. Dreyfus is the world's largest rice and cotton trader.

"The New Zealand operations are tiny in relation to the whole thing," said Brian Gaynor, who helps manage $600 million at Milford Asset Management. It is "impossible to know" at this stage what the implications would be for the New Zealand assets.

"There's a long way to go - Singaporeans don't give up their companies easily," he said.

Olam is part-owned by Temasek Holdings, the Singapore government's investment unit. Dreyfus, which operates in more than 55 countries, had sales of US$34 billion last year.