Nufarm is believed to be closing in on a $US500 million ($658m) portfolio of ChemChina’s crop protection assets, according to sources, in a sales process where the listed Australian agrochemicals operation is going head to head with its major shareholder Sumitomo.
A dataroom is understood to have been opened by ChemChina for the sale of assets within its subsidiary Adarma Agricultural Solutions, an Israeli crop protection business.
Sumitomo owns 23 per cent of the Australian-listed Nufarm, but it appears to be heading in its own direction as it bids for the assets on its own.
Several other major groups in the US, and also potentially Europe, are said to be running the numbers on the portfolio, which has been named ‘‘The Century Group’’.
On offer are crop protection products and registrations for the products in certain geographies.
UBS is understood to be working for Nufarm on the potential acquisition, with the sales process expected to be completed in about three or four weeks.
ChemChina is divesting the assets following its merger with Syngenta, which is currently in progress. The EU has granted approval to ChemChina’s $US43 billion takeover of the Swiss-based Syngenta.Its assets are being prepared for sale to appease European regulators for the merger to proceed.
Nufarm is an Australian manufacturer of crop protection products and has a market value of about $2bn, with most of its revenue generated from herbicide products and the Latin American market.
The company’s revenue increased 15 per cent to $1.36bn for the six months to December, and it turned around from a loss in the previous corresponding period to book a $20m net profit.
However, shares have fallen 10 per cent after reaching a five-year high in the second quarter of this year.Citi’s analysts say in a research note out this week that despite the company’s improvements to drive bottom-line growth, challenges remain for the business.
Part of the problem, say the analysts, is that crop markets remain oversupplied.
However, drought fears in the US have helped commodity prices stage a strong rally recently, particularly wheat, spiking 57 per cent since April.
This is even though the underlying fundamentals for the price actually remains poor, with wheat stockpiles in the US at 11-year highs.
Citi says that Nufarm’s business improvement program of cutting costs will ensure earnings growth over coming years, but the current expectations may be too high.
The investment bank reduced its earnings forecasts for the 2017 and 2018 financial year and said it viewed the stock as fairly valued.
Nufarm expects to produce earnings growth of 23 per cent for the 2017 financial year and 10 per cent the following year.
Shares in Nufarm closed 9c lower at $9.01.
The Australian, 11/07/2017
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