People seem to be ignoring one big issue here.....an offer of over $17 was tabled in late 2007 and the deal was pretty much done but then the drought bit in and debt markets started to seize up. It will remain very difficult for Nufarm Board to recommend acceptance of a takeover bid from Sinochem at $13.50 or less.....how would they convincingly explain that to shareholders??
If you analyse the top 20 shareholders most of these guys have been in this for a reasonable period of time so references to this year's $300m capital raising are a bit irrelevant.....they raised $200m capital in 2008 (was significantly oversubscribed too) at $15.10 a share!! Why do people think major shareholders are going to jump on the bus to sell at $13 or $13.50???
IMO to get this deal done Sinochem will need to offer at least $15. The problem is that Sinochem will find it hard to justify such a high price given the current underlying profitability of the business and the huge glyphosphate market issues - hence why they will be looking over the books in the data room for some time! People keep saying China are long term investors and don't worry about PE ratios etc etc.....but they are not silly either and won't pay a massive premium.
I am happy to sit on the sidelines now as this could out to be quite a stalemate......smart business men don't tend to give their businesses away at the bottom of economic cycles - just plain dumb!
NUF Price at posting:
$11.04 Sentiment: None Disclosure: Not Held
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