China National Chemical Corp. offered A$2.96 billion ($2.7 billion) for Australian farm-chemical maker Nufarm Ltd. and invited two U.S. private equity firms to join the bid, three people familiar with the matter said.
China National, known as ChemChina Group, submitted a letter to Nufarm on Oct. 31 with an indicative bid of A$17.25 per share, two of the people said, declining to be identified because the details are private. The company asked Blackstone Group LP, manager of the world's biggest buyout fund, and Fox Paine & Co. to take minority stakes in Nufarm, they said.
ChemChina would be the first state-owned Chinese company to team up with buyout firms for an overseas acquisition, the people said. New York-based Blackstone, which counts China's $200 billion sovereign wealth fund among its investors, in September agreed to buy a stake in ChemChina's specialty chemicals unit, China National BlueStar Group Corp., for $600 million.
``You'll see more of the giant state-owned firms teaming up with the big boys in the buyout industry,'' said Vincent Chan, chief executive officer of Spring Capital Asia Ltd., a Hong Kong- based buyout firm. ``The benefits are complementary. It helps Chinese companies go overseas to seek growth, and boosts returns for buyout firms.''
The offer is 11 percent above Nufarm's last traded price. ChemChina may seek to make the acquisition through BlueStar, of which it owns 80 percent, said the people. Melbourne-based Nufarm is the biggest maker of farm chemicals in Australia.
Nufarm had its shares suspended from trading yesterday and said it received a letter the day before that ``relates to previous discussions that Nufarm has been involved in concerning a transaction that may result in a change of control.''
The company's shares rose 13 percent to A$15.60 on Oct. 31 following a South China Morning Post report that Nufarm may get a revised bid from Blackstone and BlueStar after rejecting an initial offer of A$17.10 a share.
Mergers and acquisitions in the chemical industry are likely to increase as manufacturers compete to secure supply, UBS AG said in July. Permira Advisers LLP, Europe's biggest buyout firm, last month agreed to buy Arysta LifeScience Corp., the world's largest closely held farm chemicals maker, for about 250 billion yen ($2.2 billion).
A successful cash bid would need to be between A$17 and A$20 a share, Credit Suisse Group analysts said yesterday. Nufarm stock has risen 51 percent this year, valuing the company at A$2.67 billion.
ChemChina plans to buy some shares from Nufarm Chief Executive Officer Douglas Rathbone and make a general offer to other stockholders, the people said. Rathbone, who owns 17 percent of Nufarm, would be asked to remain in his position after the takeover, they said.
A hostile takeover without the acceptance of Rathbone would be ``fruitless,'' Credit Suisse said.
Fox Paine was started in 1997 by former Kohlberg Kravis Roberts & Co. partner Saul Fox with W. Dexter Paine, III, another ex-KKR partner. Fox serves as chief executive officer and Paine is the company's president.
The buyout company sold its stake in U.S. seedmaker Seminis Inc. in 2005 to Monsanto Co., the world's biggest maker of genetically engineered crops.
Zhou Chuanrong, a Beijing-based spokesman for ChemChina, declined to comment. John Ford, a New York-based Blackstone spokesman, didn't return calls or respond to e-mails seeking comment. Andy Brimmer, a spokesman at Foster City, California- based Fox Paine, couldn't immediately be reached after hours.
Chinese companies, buoyed by economic growth of more than 11 percent at home and flush with cash after raising about $95 billion in stock sales this year, are seeking overseas takeovers. China is home to five of the world's 10 largest companies by market value, compared with three for the U.S.
Industrial & Commercial Bank of China Ltd., the world's largest bank by market value, agreed last week to buy 20 percent of Standard Bank Group Ltd., Africa's biggest bank, for 36.7 billion rand ($5.6 billion). Citic Securities said Oct. 22 it will pay $1 billion for the equivalent of 6 percent of New York-based Bear Stearns Cos. ( Bloomberg )