Nufarm to Form Strategic Alliance with Sumitomo

Submitted by Jim Thesiger on 30 December, 2009 - 06:08

The Australia based agricultural chemical producer and supplier Nufarm (NUF) recently declared that it will go for strategic alliance with Japanese Sumitomo Chemical Company instead of signing a deal with China based Sinochem. Under the new proposal, Sumitomo is planning to obtain 20 percent ownership of Nufarm for around $610 million. The news will bring some relieve for the Nufarm investors as the deal will allow them to sell their shares in exchange of a substantial premium. It is to be mentioned that Sinochem, which proposed a takeover bid for Nufarm has shaved as much as $218 million from its original $2.8 billion bid recently.

Under the Nufarm-Sumitomo deal, the purchase will be conducted through a tender offer at $14 per Nufarm share- which is 33 percent higher than the share's earlier closing price and 16 percent higher than the revised $12 per share offer that was made by Sinochem. The Nufarm shares were boosted by as much as 3 percent at the closing of yesterday’s trade.

While talking about Nufarm’s decision to walk away from the Sinochem deal, the chairman of the agribusiness company Kerry Hoggard stated that the revised offer presented by Sinochem was not all that impressive in comparison with its original bid and in addition to that, the proposal remained subject to several conditions which Nufarm considered as objectionable. The board reviewed the Sinochem proposal carefully before it decided to turn it down, Mr. Hoggard added. The chairman also stated that the Sumitomo deal came up with greater value and assurance for the Nufarm shareholders and the crop protection business of the Japanese company generates about $US1.3 billion annually and has a product portfolio which is complementary to Nufarm’s own portfolio. Nufarm’s announcement was followed by a Sinochem statement where the China based company expressed its disappointment regarding Nufarm’s decision to decline its proposal.