Nufarm: Sinochem taking time to reach conclusion on pricing issue

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Sinochem is currently working expeditiously to reach a conclusion on issues around pricing in its bid for Nufarm [ASX:NUF] although the process is expected to take some time, dealReporter has learned.

The Chinese state-owned enterprise is now reviewing and awaiting further information from Nufarm but is hoping that it can sign a mutually acceptable transaction implementation agreement by or before the limited extended deadline on 23 December 2009.

The exclusivity period expires today [3 December 2009] and discussions between the companies will be conducted on a non-exclusive basis until the limited extended deadline of 23 December 2009. The new deadline imposed by Nufarm is said to be firm and chances of interlopers emerging is thought to be low.

Despite the fact that the ongoing process involving the exchange of information is likely to take some time, it was said that the unexpected delay is not necessarily being viewed upon negatively. Rather, it is seen more as a procedural maneuver given the size and complexity of Nufarm’s global business.

It is known that a number of issues have arisen during the ongoing due diligence review, which has led Sinochem to re-evaluate a number of factors including the indicative offer of AUD 13 per Nufarm share. The challenging environment is one factor that Sinochem may take into consideration as it deals with this issue, it was said.

However, as discussions remain fluid at this stage it remains unclear if any price adjustments will be made in the end, it is understood.

Should there be any deviation to the AUD 13 figure, Sinochem would have to figure out how to renegotiate terms with Nufarm’s board, which reaffirmed today that that it intends to proceed at the previously agreed price.

A source with knowledge of the situation but not involved in the transaction noted that several hundred Sinochem staff are working on the deal in hopes of reaching a conclusion as soon as practical and that it could be possible that an agreement could be reached prior to 23 December 2009. Sinochem has approached this transaction incredibly cautiously from the start but is eager to see the deal through, the source added.

It is also keen to avoid creating negative sentiment for outbound China transactions given Sinochem’s role as a state-owned enterprise, the source explained.

Nufarm entered into a heads of agreement with Sinochem on 28 September 2009.

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