FIRB to break new ground on Nufarm takeoverJAMIE FREEDSeptember...

FIRB to break new ground on Nufarm takeoverJAMIE FREED
September 28, 2009

"IT HAS been more than two months since Nufarm revealed it was in takeover talks with China's Sinochem and there has been little in the way of an update since.

However, Nufarm releases its annual results this morning, and BusinessDay has heard a transaction - or at least a significant update on progress to date - could be announced. What is clear is that Sinochem has not walked away from the potential $2.5 billion deal.

There have been predictions from analysts that Nufarm, advised by UBS, and Sinochem, advised by RBS, could strike a deal at up to $14 a share, although a recent spate of earnings downgrades by Nufarm are unlikely to have assisted its bargaining position.

That compares with the $11.25 a share at which Nufarm raised $300 million in May. Its managing director, Doug Rathbone, sold $19.7 million of his holding at that time but has retained 11 per cent of the company. Nufarm closed at $11.14 on Friday.

Nufarm's latest guidance was for a profit of $135 million to $145 million excluding significant items, but that was made with the caveat that it was subject for review.

Macquarie Equities last week noted the potential for further earnings risk to the downside, but added that was unlikely to matter much in the context of the Sinochem deal because Nufarm would provide it with a strong distribution platform over the longer term.

A bid from Sinochem will require the approval of the Foreign Investment Review Board. There have been few if any test cases of bids from Chinese state-owned companies outside the resources industry, so the process will be watched with interest".