Chinese state-owned firm Sinochem has agreed in principle to buy farm chemicals group Nufarm for $2.8 billion in a deal that will again test investment ties between the two nations.
Nufarm said on Monday it had signed a heads of agreement with Sinochem whereby the Chinese firm would offer $13 per Nufarm share, a near 17 per cent premium to Nufarm's last traded price.
Shares in Nufarm rose more than 8 per cent on the news and ended the day up 82 cents, or 7.4 per cent, to $11.96, despite major indices falling.
The deal is subject to due diligence and regulatory approvals, including consent from Australia's Foreign Investment Review Board which has stymied at least two major Chinese investments in Australia this year on national interest grounds.
The main attraction for Sinochem is Nufarm's global distribution network, which includes businesses in Asia, South America and Europe, analysts have said.
"The execution... is subject to Sinochem being satisfied with the results of its due diligence enquiries and approval by Sinochem and the Nufarm board," the Nufarm statement added.
Nufarm said there was still no certainty a deal would proceed, despite its support for the heads of agreement.
It is the second time Nufarm has received an approach from a Chinese firm in two years. In 2007, China National Chemical Corp, China's leading chemical producer, led a $3 billion approach with US private equity firms Blackstone Group and Fox Paine Management, but they did not make a formal offer.
Nufarm is being advised by UBS, while the Royal Bank of Scotland is advising
Sinochem.
Reuters
