Olam International is considering its next move after its takeover offer for New Zealand Farming Systems Uruguay was trumped by a new local player.

Uruguayan company Union Agriculture Group has offered 60 cents a share for Farming Systems, five cents higher than Olam’s bid.

The offer comes after it was revealed last week Farming Systems may be eligible for up to US$25m in tax breaks from the Uruguayan Government.

Farming Systems chairman John Parker says shareholders should hold off on making a decision.

Farming Systems has also bought the company’s management contract from PGG Wrightson for $4m, but Mr Parker says it will continue to use the rural services company as a preferred supplier.

“The relationship with PGG Wrightson will continue, this isn’t an unfriendly process.

"Part of it is that we will continue to have a preferred supply arrangement with PGG, because they have the capability and the structure to supply most of the things we need for our dairy farmers in Uruguay.

"It’s on the basis that they must be demonstrably competitive, and we will continue to use the senior management expertise that PGG has in Uruguay to deal with the things that are exclusively Uruguayan.”

Farming Systems shares have surged to 63 cents at the news.

Business commentator Brian Gaynor says an Olam counter-offer is likely.

“It’s hard to know, [Olam] have an agreement with PGG Wrightson, we don’t know all those details, but it’s effectively locked up all of those shares.

"One assumes that PGG will be trying to get Olam to bid a higher price, probably more than 60 cents.”

He agrees shareholders should wait before committing to a bidder.