NZ Farming Systems Uruguay's directors have recommended Olam International's takeover bid, which values the dairy farm developer at $171m.

Farming Systems’ chief financial officer Andrew Clark says the increased offer, which is now in the independent adviser report’s valuation range, and assurances that Singapore-based Olam will be able to provide funding, helped sway them.

 “Originally the offer – the 55 cent offer – was seen as too low. Obviously the 70 cent offer is now within the range of the independent advisors valuation report.

"The board has been engaging with Olam over the last couple of weeks on trying to get greater certainty around some concerns that it had. They were around the funding and also Olam’s intended strategy.”

“As a result of those discussions the board has been able to get comfort and sees that the best interests for the company is to have Olam on board as a strong cornerstone shareholder .

"They’re well funded and committed to the strategy of intensive pastoral dairy farming.”

Mr Clark stressed the board's recommendation was for a partial share sale to Olam, giving the company a majority but not a 90 per cent stake that would trigger a complete takeover bid under the Takeover Code.

“We think also that shareholders shouldn’t lose sight of the potential for the company, and so we’re encouraging that they consider accepting in part so that the offer is successful, but also think about staying in the company.

"The board believes that it’s important to have a strong minority shareholding in there that would allow both Olam and the other shareholders to share any future upside in the value of the company.”

Last week, Olam upped its price to 70 cents a share from 55 cents after Uruguay’s Union Agriculture Group (UAG) put in a rival bid.

But UAG dropped out of the race.

Business commentator Brian Gaynor says Olam may well exceed the 90 per cent mark.

“Normally when directors make a recommendation shareholders agree to accept the offer. But under the takeover rules here Olam has to get to 90 per cent to make a compulsory acquisition. If it doesn’t get to 90 per cent, if enough of the shareholders don’t sell, they could end up with 75 or 80 per cent and the company would remain listed on the New Zealand stock exchange.”

Olam needs another 13% to reach its target 50.1% stake in Farming Systems after ACC sold its 7% holding last week.