Nufarm pays $690m for European ag chem range

Nufarm's spends $690m to buy Adama lines and grow lucrative Euro market


Agribusiness
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Nufarm has asked shareholders for an extra $446m as it buys product lines from Adama

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Australia’s own global farm chemical maker, Nufarm, is picking up extra market share in Europe via a $691 million purchase of herbicide, fungicide, insecticide and seed treatment lines offloaded by Adama Agricultural Solutions.

Nufarm is also expected to make another similar crop protection portfolio purchase, worth about $120m, by November.

The moves coincides with the company strengthening its collaboration ties with Japanese conglomerate, Sumitomo, which owns about 23 per cent of the Melbourne-based agribusiness.

Nufarm will buy Adama’s “Century” brand  portfolio of off-patent products, including inventory stocks worth $64m.

The range is sold in 29 European markets including Germany, Spain, France, Italy, Poland and Romania and applies to cereal, corn, nut, vine, tree and vegetable crops.

It increases our relevance to customers by allowing us to offer a more comprehensive suite of crop protection solutions in a number of very important crop segments - Greg Hunt, Nufarm Limited

Managing director, Greg Hunt, said the acquisition strengthened Nufarm’s presence in Europe, where it already generated its highest crop protection margins.

“It also enables us to participate strongly in the important European oilseed rape market,” he said.

A stronger market position in Europe would also help the company be a preferred development and go-to-market partner for other crop protection product makers.

To help pay for the deal Nufarm is raising about $446m through a share entitlement offer allowing existing shareholders two new shares for every nine they currently hold, for a discount price of $7.50 a share.

This week Nufarm shares were in a trading halt on the Australian Securities Exchange as an institutional entitlement bookbuild associated with the offer was completed.

What’s the deal?

The Century chemical portfolio deal follows the acquisition of the big ag chemical giant, Syngenta by ChemChina, which also owns Adama Agricultural Solutions.

ChemChina was required by the European Commission to divest some of its business after May’s Syngenta takeover.

Nufarm and Adama expect the sale to be concluded by March next year.

Nufarm intends to expand its regional sales and technical marketing capability to support the new portfolio and start manufacturing most products at its own sites within three years.

Nufarm managing director, Greg Hunt.

Nufarm managing director, Greg Hunt.

Mr Hunt said the new portfolio would consolidate Nufarm’s position as a leading European post-patent supplier.

“It increases our relevance to customers by allowing us to offer a more comprehensive suite of crop protection solutions in a number of very important crop segments,” he said.

“The products we are acquiring generate very attractive margins and complement our existing European product range.”

The portfolio involves chemistry lines formulated as both straight active ingredients and innovative mixture products, and includes strong brands that are well supported by both distribution customers and by end users of the products.

Sumitomo ties strengthen

Meanwhile, Nufarm and Sumitomo will extend their working arrangements initiated in 2010, with particular emphasis on giving Nufarm more access to the Japanese chemical maker’s fungicide pipeline.

Since Sumitomo became a strategic investor in Nufarm seven years ago both have been working together on distribution, development and manufacturing projects which have now been formalised to take advantage of novel chemistry in Sumitomo’s pipeline.

The collaboration deals are global in scope, but Sumitomo and Nufarm will prioritise strategically important, high value markets, in particular developing mixture products targeting Asian soybean rust in Latin America.

Mr Hunt said Brazilian farmers spend more than $2.56b annually controlling soybean rust.

He was excited by the new chapter with Sumitomo Chemical, leveraging the strengths of both companies to “deliver a valuable portfolio in targeted crops and geographies”.

Sumitomo Chemical, one of Japan’s leading chemical players with annual sales worth 2 trillion yen, makes products relevant to the petrochemical, energy and functional material, crop science and pharmaceuticals industries.

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