DISTRESSED debt investor Hamilton Securities is set to partner with the world's biggest grower of Indian sandalwood in a tilt for Elders' forestry assets in the Ord River region of Western Australia.
Hamilton is poised to launch a counter-bid for the embattled rural services group's plantations and plans to employ ASX-listed TFS to manage and harvest the plantations if successful.
TFS owns and manages plantations near the Elders' assets, as does Hamilton's rival bidder Santanol.
Santanol's offer related to 15 managed investment scheme projects, with Elders subsidiary Elders Forestry Management the responsible entity on behalf of 3634 growers.
Elders reportedly stands to make $21.55 million from the Santanol offer, while the growers would pocket about $46.5 million.
But Hamilton says the Santanol bid undervalues the assets and is offering a scrip deal for growers.
Under the offer, growers would own about 94 per cent of the listed investment company, which would hold the growers' interests.
Hamilton executive Giles Craig said a maintenance deal with TFS would be crucial to the possible offer.
"Without having a reputable manager in place we would have very little credibility," he said.
"We gave Hamilton a price on what we would require to be funded to remediate, manage and harvest the plantations," said Ian Thompson, a senior adviser to the TFS executive chairman and 16 per cent shareholder Frank Wilson.
"I was expecting whoever was successful in the bid to approach us, rather than re-create infrastructure that we already have in place," Mr Thompson said.
TFS controls 6500 hectares of Indian sandalwood, mainly in the Ord River, where assets are due to be harvested this year.
It was involved in a stoush last year with a group of small shareholders who sought to spill the board via an extraordinary general meeting.
The group had four directors in its sights, including Mr Wilson and former cricketer Adam Gilchrist, citing a range of corporate governance and performance concerns.
Elders released a statement to growers on Thursday discrediting Hamilton's proposed bid.
"EFML strongly recommends that growers ignore any approach from Hamilton Securities concerning its incomplete proposal and that growers vote in favour of the fully documented, fully funded proposal by Santanol," the company said in the statement.
"At this stage, there is little information about the financial capacity of Hamilton Securities to back any such proposal and meet ongoing rental and management costs."
Selling the forestry assets is critical for Elders.
It is also trying to sell its auto and rural services divisions.
Forestry is continuing to drain the company's cash flow.