No wonder shares in agricultural chemicals supplier Nufarm jumped sharply yesterday: the market reckons it’s only a matter of time before Japan’s Sumitomo Chemical Company makes a move to snaffle more of the company.
Just how much more though is the moot question.
Punters are betting a bigger offer to all shareholders might be made, but they might be waiting a while.
Sumitomo says it intends to further lift its stake in Nufarm Ltd after buying 4.5 million shares from the company’s chief executive Doug Rathbone.
Sumitomo said yesterday that it had increased its stake in Nufarm to 21.7% and intended to acquire another 1.3%, which would take its shareholding in Nufarm to 23%.
The shares were up more than 7% or 35c at $5.12 at one stage, but they closed up 5.2%, or 25c, at %5.02, 26c under the price Sumitomo paid.
That’s a sign the initial eagerness is wearing off and it wouldn’t surprise to see Nufarm shares ease further in coming days.
The purchase of 4.5 million Nufarm shares from Mr Rathbone was agreed after the market had closed on Monday at $5.28 per share.
There have been rumours for a month now that Mr Rathbone might sell some or all of his remaining stake in Nufarm to help meet personal debts.
But he said yesterday he would use the proceeds to meet a personal tax liability later this year.
But up till yesterday’s announcement from Nufarm they were just stories in the market.
Sumitomo became Nufarm’s biggest shareholder in April of last year after acquiring 20% of its shares via a tender offer at $14 per share.
The shares have never approached that level since because of Nufarm’s poor performance and an explosion in debt midway through last year.
It is still recovering from the effects of those problems.
"Sumitomo plans to purchase additional shares from the market within the next six months so that Sumitomo’s shareholding in Nufarm will reach approximately 23 per cent," Sumitomo said in a statement.
"The decision to increase Sumitomo’s ownership stake in Nufarm is a clear indication of Sumitomo’s confidence in Nufarm’s business and the strong growth prospects that exist for both Nufarm and Sumitomo."
Sumitomo said that since making its strategic investment in Nufarm in April 2010, its collaboration with Nufarm in distribution, development, product formulation and logistics had started to generate benefits.
It said that increasing the stake in Nufarm would strengthen the relationship with Nufarm and expedite collaboration in more areas.
Mr Rathbone said he had decided to sell the 4.5 million shares after Sumitomo had indicated it intended to lift its stake in Nufarm from 20% to 23% by taking advantage of the "creep" provisions in the Corporations Act.
Under the terms of the agreement between Nufarm and Sumitomo, Sumitomo cannot increase its shareholding in Nufarm beyond 23% without the approval of the Nufarm board.
Alternatively, Sumitomo can make an offer to all Nufarm shareholders to acquire the company.
"The opportunity to sell this parcel of shares to Sumitomo avoids any market disruption that might result from the on-market sale of Nufarm shares owned by me," Mr Rathbone said in a statement.
"I am also pleased to see that Sumitomo intends to increase its strategic stake in Nufarm and continue to explore areas where the two companies can co-operate and build value for both businesses."
He said he had "no current plans to sell down his remaining stake in Nufarm, which stands at 11,669,890 shares following the sale to Sumitomo".
In March 2010, Mr Rathbone sold three million Nufarm shares to pay down debt associated with his personal and family interests outside of Nufarm.
At the time, Mr Rathbone said he retained an interest of about 16 million shares in Nufarm.
He also said that in the long term it was his intention to hold 10 million shares.
