Tasman Farms – Decision required by 31 January
Shareholders of Tasman Farms, which trades on the Unlisted facility, have an important decision to make this week. Should they accept the $1.10 a share offer from New Plymouth District Council or reject the bid and be locked in as a minority shareholder in an illiquid stock? When the NZX listed Tasman Agriculture was liquidated in 2001, after the sale of its New Zealand farms, shareholders received one Tasman Farms share for every Tasman Agriculture share. Tasman Farms owns 23 Tasmanian dairy farms and one sheep and beef farm. Its major shareholders are the Allan Hubbard controlled Dairy Holdings, with 41.5%, and the Douglas family, which has 19.9%. On 9 November New Plymouth District Council announced its intention to make a full takeover offer for Tasman Farms at $1.10 a share. Dairy Holdings has agreed to accept in respect of its 41.5% shareholding and the acceptance condition will be met once the bidder holds or controls more than 50% of the voting rights. An independent property valuation determined that Tasman Farms’ net asset backing was $1.40 a share but Deloitte, the independent adviser, concluded that the company’s full underlying value was between $1.25 and $1.33 a share (Deloitte applied a discount of between 5% and 10% to net asset backing for sale costs and realisation uncertainties). Deloitte determined that the $1.10 offer was not fair and the independent director recommended rejection of the bid. However Edward Sullivan, the only independent director, has had a change of heart. On 21 January he wrote to shareholders indicating that they should reconsider their decision in light of the downturn in world sharemarkets and the prospect of being “locked in” as a Tasman Farms shareholder. Sullivan has now decided to accept the $1.10 offer in respect of his own shareholding. NZ Farming Systems Uruguay Tasman Farms Share price $1.40 $1.10 Market value $341.9m $73.8m NTA per share $1.26est $1.40 Premium/discount to NTA +11% (21%) Tasman Farms shareholders have a difficult decision to make before Thursday 31 January. The Tasmanian farming company appears to be far cheaper than the NZX listed New Zealand Farming Systems Uruguay but the latter has momentum and will join the benchmark NZX 50 Index on 1 February, just six weeks after listing. Hubbard’s acceptance, and Sullivan’s about turn, indicates that investors are expecting higher returns from the Uruguayan dairy sector than the Tasmanian.
Brian Gaynor, 29 January 2008