SinoChem Group (SinoChem) has confirmed to make takeoverapproach to Australia’s top farm chemical supplier Nufarm Limited(Nufarm), reveals Sinochem on July 26th 2009.

‘Current discussions are still at preliminary stage and there is nocertainty that matters will progress,’reveals SinoChem in a publicstatement.‘This is one of the potential growth
opportunities that Sinochem is currently exploring.’
Nufarm also claims that there has been no certainty that anagreement would be reached or an offer put to shareholders up tonow, but the news has greatly boosted the investors’ confidence.The company’s share price rose from USD7.49 (AUD8.92) per share on22nd July to close at USD9.41 (AUD11.2) per share on 10thAugust.

As the fourth largest petrochemical corporation in China,SinoChem’s takeover plan of Nufarm shows its great ambition tofurther widen the business scope and enhance itscompetitiveness
in overseas market, especially in agrochemicals sector.

In recent years, SinoChem has been gradually establishing acomplete value chain for agrochemical business, which is widelyviewed as a stable profit source currently, through operations ofits listed subsidiary company SinoChem International (holding) Co.Ltd
(SinoChem International).

After purchasing Nufarm, one of the biggest off-patentagrochemical companies, SinoChem is able to extend its presence inglobal markets and enhance its R D on off-patentagrochemical products.

Currently, Nufarm has operations in Australia, New Zealand, Asia,Europe and the Americas and sells products to over 100 countries inthe world, mainly concentrated in four regions, namely
Australasia, Europe, South America and North America that havestrong demand for agrochemicals, according to Nufarm’s semi-annualreport in H1 2009.

Nufarm is expected to obtain large benefits if the takeoversucceeds, which will help it get rid of current tough situation ofsales decline. On June 16th 2009, Nufarm announced that it wouldnot achieve previous earning target of USD184.9 million (AUD220million) up to this July. And the net operating profit may be10%-15% lower than a previous forecast due to slumping sales ofglyphosate, mainly caused by currently intense cut-pricecompetition, especially that from China.

It is considered as a golden chance for SinoChem to acquire Nufarmat the discount prices before the recovery of developed economies,as the total market value of Nufarm is estimated at about USD1.95billion this July, significantly lower than the aborted bid ofUSD2.5 billion in 2007, when China National Chemical Corp(ChemChina), another leading Chinese chemical producer, attemptedto take over Nufarm by cooperating with two US private equity firmsBlackstone Group and Fox Paine Management, which failed finally foruncertain reasons.

However, the takeover is unlikely to progress smoothly due tofollowing uncertain factors.
First, SinoChem might face capital shortage after its successiveglobal expansions such as the purchase of SOCO Yemen Ltd. in 2008at price of USD465 million. Also, the company announced to bidUSD875 million for UK-based Emerald Energy Plc on Aug 12th 2009, toexpand its oil and gas business production capacity in Middle Eastand South America.

Second, some experts in SinoChem have doubted the profitability ofNufarm’s international sales network and its development potentialto grow into an agrochemical giant like Syngenta, Bayer, etc as ithas little advantage in innovative pesticide development.

Third, it is rumored that other deep-pocketed companies likeMonsanto and Syngenta are also
potential suitors, which might become strong competitors toSinoChem.

Fourth, it is difficult to predict the exact action taken by DougRathbone, Nufarm\'s chief executive as well the biggest shareholderwith over 11% stock, especially when he faces a lower bid than thatoffered by ChemChina two years ago.

SinoChem is China\'s leading integrated agricultural companyfocusing on agriculture (including fertilizer, pesticide and seedproducts), energy, chemical, etc, and is also a large player inhigh-end commercial real estate business and non-banking financesector. It has been listed as the Top 500 Global Corporations for19 times up to now, ranking the 170th in 2009. The company’s salesincome and profits have soared greatly in recent years after
quick expansion.