Shares hit after $3bn offer disappears
Geoffrey Newman | December 11, 2007
INVESTORS hammered shares in pesticide maker Nufarm yesterday after its Chinese suitor unexpectedly pulled out of a $3 billion agreement to buy the company.
But there is still confidence the company will eventually be sold.
Nufarm shares plunged more than 12 per cent after state-owned Chinese chemical giant ChemChina told Nufarm it was unable to put forward a concrete proposal, with the deal’s failure being blamed on credit markets.
Nufarm entered an exclusivity deal with ChemChina and its private equity partners when the offer was announced on November 5. That deal was due to expire last night but it apparently became clear over the weekend that the takeover consortium was unable to come through with a detailed proposal in time.
“The consortium has advised Nufarm that it will be unable to formalise its proposal prior to the expiry of the exclusivity period and, accordingly, discussions between Nufarm and the consortium have ceased,” Nufarm said in a statement yesterday.
Nufarm had recommended its shareholders accept the offer of $17.25 a share, plus a special dividend of up to 30c a share.
The deal – the biggest so far between Australian and Chinese companies – would have combined Nufarm with the largest pesticide business in China to create a group with $2.6 billion in annual revenues, described as the global leader in off-patent crop protection.
The supply of debt finance, which had dried up in the wake of the US sub-prime loans crisis, appeared to be improving in early November when the Nufarm deal was first announced, but credit markets unexpectedly deteriorated again less than a fortnight later, driving back up the cost of money needed to fund the deal.
It has also been suggested that there was tension between the Chinese, who were focused on the longer-term performance of the business, and their US private equity partners Blackstone and Fox Paine, who were concerned about the shorter-term economics of the deal and therefore were more sensitive to the cost of funding, which effectively doubled since the crunch began mid-year.
Nufarm chief executive and major shareholder Doug Rathbone is understood to be particularly annoyed at having his attention diverted from the business for a month for no result, especially since it was never formally up for sale, but was enticed by the high price offered.
A company spokesman yesterday described it as a “very onerous and distracting process”.
“We are disappointed that the deal couldn’t be completed,” he said.
But many in the market still expect an eventual takeover of Nufarm.
The company says a number of parties have expressed interest in buying the business.
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