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Nufarm announces terms of A$250 million equity raising to repay debt

Tuesday 20th April 2010

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Nufarm, the Australian headquartered, global agricultural chemical manufacturer, announced details of its previously flagged $250 million equity raising to strengthen its balance sheet.

The fully underwritten entitlement offer to all eligible shareholders includes 20% shareholder, Japan’s Sumitomo Chemical Co. and will reduce the company’s gearing and allow it to pursue growth opportunities as they arise, said managing director Doug Rathbone.

The renounceable offer will allow eligible shareholders to subscribe for one new Nufarm share for every five they hold on Friday, at a price of A$5.57 per new share. Sumitomo has committed to taking up its full 20% entitlement, and the price represents an almost 26% discount to Nufarm’s closing share price on April 19.

Nufarm’s recently released interim result shows a continuing sales deterioration in its key product, glyphosate, during the half year to January 31. This has come about through lowered demand for crop protection products due to climatic factors in major world markets.

Rathbone said Nufarm expects an earnings recovery in the second half of the financial year, and said the company is on track to meet its previous guidance for full year net operating profit, net debt and gearing levels.

He said Sumitomo’s investment delivers important medium to long term value to shareholders, with opportunities for strategic co-operation. In terms of global crop protection sales, Nufarm is ranked 8th and Sumitomo 9th, with virtually no overlap in product portfolio.

“Each company has distribution strengths in different geographies,” Rathbone said, confirming that he intends staying on as managing director for several more years. “There is value in combining Sumitomo’s basic discovery skills in developing proprietary chemistry and Nufarm’s skills in market-driven product innovation,” he said. 

He summarised their areas of cooperation as being in sourcing, manufacturing and logistics, product development and product distribution.

“Our strategic growth drivers are in expanding the global platform, broadening the product portfolio and new opportunities in seeds and seed treatment,” Rathbone said. “There is significant potential for growth on all of these fronts.”

The retail entitlement offer closes on Friday, May 14.

Trading in the shares has been halted. Nufarm last sold at A$7.75 a share.

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