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Talk of a Chinese takeover is now a reality for Australian herbicide maker Nufarm.
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 agreement relates to a non-binding proposal for the Chinese company to buy all of the issued ordinary shares in Nufarm for $A13 each.
Nufarm’s market value is about$A2.4 billion.
Nufarm, which has reported a slump in its farm chemicals sales, reported a 42% fall in its net profit last week to $A79.9 million for the year ending July 31. The company’s final dividend would be A15c per ordinary share.
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 Corpo, backed by buyout fund Blackstone Group, ended talks to buy the company for $A3 billion. No reason was provided.