Melbourne-based agricultural chemical firm Nufarm has outlined a A$691 million plan to buy the crop protection portfolios of European businesses Adama and Syngenta, as part of the latter companies’ involvement in a merger deal.
Nufarm, which already does business in Europe, told the ASX on Tuesday it would acquire brands with over 50 crop protection formulations, and more than 260 registrations in European markets, as part of the deal.
Products include herbicides, fungicides, insecticides, seed treatments and plant growth regulators, currently sold in countries like Germany, Spain, France, Italy, Poland and Romania.
Syngenta, a Swiss agribusiness, is being acquired by ChemChina, Adama’s parent company.
As part of that deal, the two companies need to divest the assets being sold to Nufarm, in order to appease the European Commission on competition grounds.
Nufarm’s acquisition will be subject to the Commission’s deeming it a “suitable purchaser,” but assuming the deal goes through, the ASX-listed firm will pay US$490 million (A$627 million) in cash for Syngenta and Adama’s product lines, and a further US$50 million (A$64 million) for their existing product inventories.
In return, Nufarm estimates the acquisitions will add A$250 million in revenue, A$95-100 million in EBITDA, and a “mid to high single digit” increase to the company’s earnings per share, in the first full year of ownership (FY19).
Nufarm managing director Greg Hunt said the deal strengthened his company’s presence in Euripe, where it currently generates its highest crop protection margins.
“The addition of the portfolio consolidates Nufarm’s position as a leading post-patent supplier in Europe and increases our relevance to the customer base by allowing us to offer a more comprehensive suite of crop protection solutions in a number of very important crop segments,” Hunt said.
“The products we are acquiring generate very attractive margins and are complementary to our existing European product range,” he added.
“They provide us with much broader offerings in the fungicides and insecticides segments and in our core European crops, including cereals, corn, and trees, nuts, vines and vegetables.”
Nufarm is funding the deal through the combination of a A$446 million entitlement offer, and A$272 million from existing debt facilities. Existing shareholders are being offered a 14.1% discount on the last closing price, and can buy 2 new Nufarm shares for every 9 they already own, under the entitlement offer.
The company indicated it was also in exclusive discussions over another potential crop protection portfolio, described as a “strong strategic fit” for Nufarm. The potential acquisition would be worth less than US$100 million, and would be funded from debt facilities, the company said.