Takeover ?, page-31

Nufarm is believed to have drafted investment banks JPMorgan and UBS as defence advisers, with suggestions a US-based private equity firm has approached the Australian-based agricultural chemicals company for talks about a takeover.
Nufarm declined to comment yesterday but it is understood a US buyout fund — believed to be a group such as Blackstone or Brookfield — had been weighing a potential buyout of the $1.56 billion company. No formal approaches are understood to have been made.
After early talks Nufarm, which had $1.577bn of debt at the start of the year, is understood to have insisted they return when they had an actual proposal.

The caution for a buyout fund or any other party interested in the business is that Nufarm sells the herbicide Glyphosate, which a US court found was a cause of cancer. However, the thinking is manufacturers are more likely to face legal action than distributors and it is not thought to be a major deterrent for any buyer.

Nufarm is believed to be a takeover target at a time when its share price is trading at 2014 levels. The stock closed at $4.15 yesterday. The stock touched $9.45 in 2017.
The company has been facing a perfect storm involving drought in Australia and floods in the US, along with glyphosate concerns. Nufarm’s seed operations are considered valuable, comprising canola, sorghum and sunflower seeds and oils and, most importantly, its omega-3 canola operations.
The company has been moving to develop a canola seed with a unique profile that includes long-chain omega-3 fatty acids, offering substantial nutritional advantages and increased DHA levels that boost human and fish health.

The seeds business is believed to be valued at between $1.50 and $2 a share, which means any acquirer of Nufarm would be securing the remaining chemicals operation at a highly opportunistic price.
Earlier, some shareholders were believed to have been eager for the company to embark on a break-up of the business, where its lucrative seeds operation was spun off. But the thinking is that private equity would have that opportunity if it was successful in buying Nufarm.
Given the company is currently trading at low levels, any offer would probably be rebuffed by the Nufarm board on the grounds that the offer was opportunistic, with the decision likely to be supported by other investors. But major shareholder Sumitomo, which is understood to have recently reduced its interest in the business, is said to be open to owning the company, along with a private party.
According to Bloomberg data, Sumitomo has an interest of about 24 per cent, while Ellerston Capital owns 13.89 per cent of the company.
The takeover talk comes as some question whether Nufarm should embark on an equity raising to drive down debt.