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Nufarm trumps Sinochem takeover with Japanese suitor

Agrichemical company Nufarm suddenly has a new Japanese shareholder after it finally rejected a long-standing offer from China’s state-owned Sinochem Corporation.

Sumitomo Chemical has agreed to buy a 20% stake in Nufarm (NZX: NFFHA) after Australia’s largest farm chemicals supplier rejected a $A2.6 billion takeover offer from Sinochem.

Sumitomo will buy the shares from investors for $A14 each, 17% more than Sinochem’s $A12-a-share offer, Nufarm said. The total price is around $A540 million.

Though talks with the Chinese company began in July, it demonstrated some reluctance just before Christmas when it lowered its offer price from an original $A13 a share to $A12.

This enabled Nufarm to play its trump card – an offer from Sumitomo that was prepared to pay the right price. The Nufarm board rejected the revised bid by Sinochem as undervaluing the company.

Sumitomo Chemical is the world’s ninth-biggest maker of agricultural chemicals and as Nufarm’s largest shareholder will gain access to its sales network in Australia, New Zealand, Europe and the Americas.

Nufarm even revealed Sumitomo's move had already been approved by Australia's investment regulator, suggesting the Japanese company had been kept on the shortlist of possible buyers for some time.

Nufarm's key product, the weed-killer glyphosate, has dropped in price recently and the company forecast that first-half profit will drop from the year before. Already, in the year through July, profit fell 42%.

Immediate concern over Nufarm's financial position is easing. The company said it had completed refinancing $A1 billion of debt coming due at the end of this year. It will also raise $A250 million in a share issue.