China's state-owned Sinochem Corporation yesterday made a provisional $2.5-billion takeover bid, for Australia's agricultural chemical manufacturer Nufarm, in order to expand its global footprint and become a leading global crop protection company.

Nufarm is one of the world's leading crop protection companies with manufacturing and marketing operations based in Australia, New Zealand, Asia, Europe and the Americas, and sells products in more than 100 countries around the world.

Sinochem Corporation, part of the Fortune 500 Company Beijing-based Sinochem Group, said that it has entered into a heads of agreement with Nufarm to acquire all of the issued ordinary shares in Nufarm for A$13.00 per share - a 17-per cent premium to Nufarm's last closing price.

Nufarm will work with Sinochem until 3 December 2009 on an exclusive basis to negotiate a transaction implementation agreement, which would includes a five-week period in which Sinochem will undertake due diligence on Nufarm.

In a statement, Nufarm said that if an agreement is reached, the Melbourne-based company's board intends to unanimously recommend the proposed acquisition, unless a superior offer materialised, and subject to an independent expert finding that the proposed scheme is in the best interests of Nufarm shareholders.

The agreement would be subject to Chinese and Australian government approval, including Australia's regulator, Nufarm shareholders and court approval.

On 24 July, Sinochem, China's biggest chemical trader had approached Nufarm and it took two months for both companies to arrive at a possible takeover (See: China's Sinochem approaches Nufarm with takeover offer). 

In December 2007 another Chinese state-owned group, China National Chemical Corporation, had joined hands with US buy-out group Blackstone to take over Nufarm in an estimated $3 billion deal . Although no formal offer was made, the proposal failed to materialise after both sides were unable to strike a deal before the exclusivity period ended.

Sinochem Group, with core businesses in energy, agriculture, chemicals, finance and real estate, is the largest integrated agriculture company in China. Its agricultural business generates revenues of over $4 billion.

''The acquisition of Nufarm, should it proceed, is consistent with Sinochem's strategy to become a leading global company in the total crop protection value chain including R&D, production, distribution and services,'' said Sinochem.

The bid saw Nufarm's stock rising by 10 per cent to A$12.22, but below the A$13 offer price of Sinochem, and analysts feel that Nufarm's shareholders would agree to the deal.

But the big question will be whether Australia's Foreign Investment Review Board (FIRB) will approve the deal, since it had said las week that state-owned enterprises should keep their holding in Australian companies to below 50 per cent.

The FIRB had told Chinese state-owned company, China Nonferrous Metal Mining Co to reduce its proposed stake from 51.6 per cent to below 50 per cent in Australia's rare earth mining company, Lynas Corporation. (See: Australia rejects another Chinese investment)

Some analysts feel the regulator may pass this proposal since Nufarm is not a natural resource company, where the Chinese have been on an acquisition or investment spree.

Sinochem set up a wholly owned Indian subsidiary, Sinochem India Co, in September 2008, after integrating Monsanto's butachlor and alachlor businesses in India, Philippines, Thailand, Vietnam, Pakistan and Taiwan in March 2008.