Second time unlucky for the agricultural chemical group, Nufarm?
The company has confirmed that it and its would-be Chinese suitor, Sinochem, have been unable to reach agreement on an agreed bid and won’t meet the deadline of today for a final agreement.
Sinochem had foreshadowed a bid worth around $2.8 billion in September, but despite intensive discussion, the two groups remained apart with the Chinese group refusing to lift its proposed $13 a share offer.
They said in a statement yesterday that they will continue non-exclusive talks past the deadline of today to see if a deal can be struck.
So far, no other parties have emerged as a possible counter bidder.
Two years ago Nufarm was locked in talks with another Chinese group, but that was terminated by the impact of the credit shutdown in late 2007.
ChemChina and US private equity groups Blackstone and Fox Paine Management had combined to offer $3 billion for Nufarm.
They never returned.
Nufarm shares fell more than 7% at one stage in reaction yesterday to a low of $10.40, the biggest drop since late August when the company produced a surprise profit downgrade.
The shares closed down 73 cents, or 6.5%, at $10.51. That was after hitting a day’s low of $10.40.
The market clearly questions that this second China deal will be done.
Sinochem signed an initial accord to buy Australia’s largest supplier of farm chemicals in late September.
Standard & Poor’s Ratings Service warned last week that it may cut Nufarm’s BBB rating should the deal with Sinochem be scrapped. That rating was maintained pending a decision on the deal.
Nufarm told China’s largest chemicals trader that it’s prepared to continue talks for a while yet.
In its statement yesterday Nufarm said that the Heads of Agreement provided for Nufarm to work with Sinochem on an exclusive basis to conduct due diligence and negotiate a Transaction Implementation Agreement (TIA) on or before December 3, 2009.
"The due diligence period has ended and the data room is closed. Nufarm today announced that the parties are not in a position to execute a TIA by December 3, 2009.
"Sinochem has undertaken extensive due diligence on Nufarm and has advised Nufarm that it is still assessing the results of its due diligence.
"The Nufarm Board has reviewed the company’s position with respect to a relatively small number of issues raised by Sinochem and has reaffirmed that those issues do not impact the Board’s view of the appropriate value required to secure Board support for any offer to acquire the company.
"Sinochem has indicated to Nufarm that it remains very interested in a Nufarm acquisition and Sinochem has not proposed any change to the previously announced price of $13.00 cash per share which was part of the non-binding proposal announced on September 27, 2009.
"Nufarm has informed Sinochem that it is prepared to continue working with Sinochem on the basis that a TIA is negotiated and executed – on the terms previously agreed – by December 23, 2009.
"Discussions between Nufarm and Sinochem will be conducted on a non-exclusive basis beyond the expiry of the exclusivity period on December 3, 2009.
"As the execution of a TIA is subject to Sinochem being satisfied with the results of its due diligence enquiries and approval by Sinochem, relevant Chinese authorities and the Board of Nufarm, there is no certainty that a TIA will be executed."
