China National Chemical Corp (ChemChina) and U.S. private equity firms offered up to A$3 billion ($2.75 billion) on Monday for Australia's Nufarm Ltd, a deal that would create the world's largest generic farm chemicals firm.
The bid by ChemChina, Blackstone Group and Fox Paine Management, which sent Nufarm shares to a record high, would mark the first time a mainland Chinese firm has teamed up with private equity for an overseas bid, according to data compiler Dealogic.
Nufarm has been seen as ripe for a takeover as chemical companies and private equity investors look to tap into booming demand from producers of soft commodities such as sugar, and analysts said there could be other offers.
It's a pretty good price, but we think there's the potential that it's not the last bid, said JP Morgan analyst Andrew Scott.
Nufarm's a good business and would hold attractions for a few people and potentially some that may be interested in coming over the top.
Analysts have speculated that Israel's Makhteshim Agan Industries (MA Industries) and U.S. agrichemicals giant Monsanto Co would have the best fit with Nufarm.
Scott said European private equity firm Permira, which last month won the race to buy agrichemical company Arysta LifeScience Corp, might also be interested in Nufarm.
If successful, the ChemChina offer of A$17.25 a share plus a 30 cent dividend, would see Nufarm combined with some of ChemChina's agricultural chemicals units to create the global leader in off-patent crop protection. The Australian firm is currently the world's No.2 supplier behind Makhteshim.
LATEST PUSH OFFSHORE
ChemChina's plan marks its latest push offshore, which began in 2005, when it bought a European silicone business from French firm Rhodia and acquired Australia's top polyethylene producer, Qenos, from Exxon Mobil and Orica Ltd.
The company was created in 2004 by putting together several chemical firms spun off from China's dismantled Ministry of Chemical Industry.
It is a $10 billion-a-year business with 120,000 employees, but is still overshadowed by state-owned Sinopec Corp and PetroChina Co Ltd.
Nufarm said it would recommend shareholders vote for the offer, subject to there being no better offer and to an independent expert's report, but added that the offer was subject to a number of conditions and there was no certainty it would result in a formal bid.
Nufarm shares surged as much as 12.3 percent to a record A$17.52, and closed up 11.2 percent at A$17.34 in a broader market down 1.7 percent.
Under the offer, which Dealogic said would be the largest Chinese buyout of an Australian company, Nufarm's management team would continue to manage the combined operations of Nufarm and ChemChina.
Any takeover would need the support of Nufarm CEO Doug Rathbone, who owns 17 percent of the company, and the Goodfellow family in New Zealand, whose affiliates together own about 10 percent.
Nufarm, established in Melbourne in the mid-1950s, posted a flat profit in the year to July before one-off items of A$121 million, hurt by a severe drought in Australia, and said it expected conditions to remain tough this year.
One quarter of the group's sales came from Europe, about a third from Australia, and slightly more in the Americas, where it owns Agripec in Brazil.
Nufarm is being advised by Goldman Sachs JBWere and Arnold Bloch Leibler.
(Additional reporting by Sonali Paul and Michael Smith)