Nufarm shareholders will be relieved that Chinese agrichemical company Sinochem is one step closer to a takeover offer.
Macquarie Private Wealth investment adviser Richard Inder said Nufarm’s performance has been poor this year with a massive profit drop to $A80 million – 42% down on last year.
Share prices were trading at $A11.14 while Sinochem Corporation has indicated it would buy all issued ordinary shares in the Australian-listed company for $A13.
This would put the market value of the company at about $2.8 billion.
Mr Inder said in July the Chinese interest was a “get out of jail” card for Nufarm.
“This would be a bonus for shareholders if it takes place,” Mr Inder said.
He said the shareprice would likely start tracking towards $A13 on the back of todays news.
Today Nufarm announced it entered in a heads of agreement with the Chinese state-owned Sinochem Corporation.
In July, Nufarm confirmed the Chinese company was interested a takeover.
The heads of agreement allows Nufarm to work exclusively with Sinochem until December 3 to negotiate the takeover.
Sinochem needs to undertake due diligence enquiries in the meantime and seek its own board approval, along with Nufarm’s.
Provided this happens, the Nufarm board has already indicated it would unanimously recommend the proposed acquisition.
Sinochem said earlier this year that a Nufarm acquisition was one of a number of strategies it was considering to expand its global reach.
This is the second attempt a Chinese company has attempted to buy Nufarm.
At the end of 2007, China National Chemical Corp, backed by buyout fund Blackstone Group, ended talks to buy the company for $A3 billion. No reason was provided.
Mr Inder said Nufarm had suffered directly as the global recession hit farm spending and destocking in many of its markets.
This article is tagged with the following keywords. Find out more about MyNBR Tags
- NZ POLITICS DAILY: Insights into government processes and wealth protection
- Networking key to Kiwi tech success in US
- Concession on fees sees ANZ first onboard for Apple Pay
- Speculation over Hilary Barry's next move
- READER POLL RESULT: Will a land tax on foreign-based house buyers cool the housing market?
Most listened to
- Sunday Business with Andrew Patterson
- Listen to the week’s top business news on NBR Radio’s week in review
- Tim Hunter asks: Is the government planning to hand control of water to iwi?
- Matthew Hooton on Winston Peters’ plan to become prime minister
- Rodney Hide on the technological development and economic advance in transport