CHINA National Chemical Corp, backed by the world's biggest buyout fund Blackstone Group LP, agreed to pay A$3 billion (US$2.8 billion) in cash for Nufarm Ltd to form the world's largest supplier of generic farm chemicals.
The offer by China National, known as ChemChina Group, values the Melbourne-based company at A$17.55 a share, 27 percent higher than its closing price on October 30, Nufarm said yesterday in a statement. The price includes the payment of a 30-cent-a-share dividend by Nufarm, it said.
ChemChina is the first state-owned Chinese company to team up with buyout firms for an overseas acquisition. Buying Nufarm gives ChemChina entry to the US$36-billion global market for herbicides and pesticides as a worldwide agricultural boom spurs acquisitions.
"It is seen as a strategic asset, and for an expanding economy like China, it's easier for them to buy the expertise of a long-standing player in the crop protection market," Greg Canavan, an analyst at Fat Prophets Management Ltd, which manages A$40 million in funds, told Bloomberg News by phone yesterday. "I'd be pretty surprised if another bid came in over the top."
Nufarm, Australia's biggest supplier of farm chemicals, rose A$1.74, or 11 percent, to A$17.34 at the Sydney close on the Australian Stock Exchange. The offer price, excluding the proposed dividend, is A$17.25.
Agricultural commodities will continue to rise with food inventories at their lowest level worldwide since 1972, Jim Rogers, chairman of Beeland Interests Inc who predicted the start of the global commodities rally in 1999, said last week. Mergers and acquisitions in the chemical industry are likely to rise as producers compete to secure supply, UBS AG said in July.
ChemChina, the largest producer of pesticides in China, will gain a company that has manufacturing operations in 14 nations and sells its products into 100 countries.