Editors’ Picks: Chinese firm eyes Nufarm takeover

Australian crop protection firm Nufarm has entered non-binding talks to sell itself to a major Chinese ag input manufacturer.

Sinochem, a Beijing-based state-owned firm billed as the largest integrated agribusiness in China, running fertilizer, pesticide and seed operations, has proposed a “scheme of arrangement” worth A$13 per Nufarm share, valuing the company at about A$2.83 billion.

The two companies on Monday announced a heads of agreement (that is, draft guidelines for a future deal) in which Nufarm will work exclusively with Sinochem until Dec. 3, negotiating a “transaction implementation agreement.”

That time period includes five weeks in which Sinochem will run due diligence on Nufarm’s operations, the companies said.

If the negotiations come to a transaction implementation agreement, Nufarm said its board “intends to unanimously recommend the proposed acquisition, in the absence of a superior proposal and subject to an independent expert finding that the proposed scheme is in the best interests of Nufarm shareholders.”

Such an agreement would also be subject to Australian and Chinese regulatory approvals, Nufarm shareholders’ approval and court approval, Nufarm said Monday.

The Sydney Morning Herald on Tuesday noted that Sinochem’s bid is estimated at A$3.8 billion if debt is included. That would make Nufarm the biggest merger and acquisition agreement by China in Australia.

Herald writer Clancy Yeates also noted that as the first big non-mining Chinese investment in the country, Sinochem’s bid may also serve as a “test case” for Australia’s Foreign Investment Review Board (FIRB).

FIRB recently indicated it preferred joint ventures to outright takeovers by Chinese state-owned firms, Yeates wrote, but added that unlike many mining firms, much of Nufarm’s business is conducted overseas and only about six per cent of it is in Asia, let alone China.

Yeates quoted Nufarm CEO Doug Rathbone as saying there had been no discussions with FIRB. Rathbone, a major shareholder in Nufarm, was also quoted as saying he’d been in talks with Sinochem about remaining Nufarm’s chief executive.

The Herald detected some skepticism, however, on the part of investors. Nufarm (NUF:ASX) closed trading Tuesday at A$11.45 per share.

Also, the Herald noted, this isn’t the first time a Chinese firm has made a play for Nufarm, citing a 2007 takeover bid by a consortium that offered A$17.25 per share but walked away after a similar period of due diligence and exclusivity.

Nufarm has operated in Canada through a subsidiary, Nufarm Agriculture Inc., since 1998. Headquartered in Calgary, the company has built up a market presence through sales of generic off-patent herbicides while also acquiring rights to older “name” brands such as Assert, Achieve and Curtail M.

– The “Editors’ Picks” feature will highlight eyebrow-raising and unusual-yet-true news from the world of farming, as gleaned from various sources by the editorial staff of the Farm Business Communications division. Dave Wreford is the retired editor of Country Guide.

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