Sumitomo 20% Stake in Nufarm; Avoca, Dioro Deal

Darlington Musarurwa
29 Dec, 2009
New York City

Australian stocks gained after commodities and precious metals rallied. Sumitomo Chemical Co. buys 20% stake in Nufarm, dumps Sinochem. Avoca makes unconditional takeover offer of Dioro Exploration.

[R]3:00 AM New York, 7:00 PM Sydney – Australian stocks gained after commodities and precious metals rallied. Sumitomo Chemical Co. buys 20% stake in Nufarm, dumps Sinochem. Avoca makes unconditional takeover offer of Dioro Exploration.[/R]

Australian market averages rose 1.1% boosted by deals as Nufarm announced Sumitomo Chemical Co. has purchased a 20% stake in the firm. Avoca Resources also announced an unconditional offer for Dioro Exploration.

Commodity stocks lifted market sentiment as gold prices edged up 0.3% to $1,107 per ounce and crude oil prices advanced 1.2% to $79 per barrel.

In Sydney trading ASX 200 Index rose 1.1% or 54.2 to 4,845.10.

Of the ASX 200 index stocks, 160 gained, 29 dropped, and 11 were unchanged. Energy World Corp. led gainers in the index shares with a rise of 15.1% followed by Spotless Group jumping 7.2%.

Sumitomo Chemical Co. Buys 20% Stake in Nufarm

Nufarm Limited reported today it has signed a Memorandum of Understanding with Sumitomo Chemical Co. Ltd. through which it has recommended the proposal from the Japanese firm to buy 20% for $14 cash per share via a tender offer.

Under the agreement, Sumitomo will be invited to nominate one Director to the Nufarm Board upon successful completion of the tender offer.

Nufarm is also subsequently expected to undertake a $250 million equity capital raising via a renounceable entitlement offer to all Nufarm shareholders, including Sumitomo Chemical.

Nufarm chairman Kerry Hoggard said Sumitomo’s offer places “an appropriate value on the company” and provides shareholders a fair price for some of their shares.

Sumitomo has since received approval from Australia’s Foreign Investment Review Board.

Nufarm Terminates Sinochem Discussions

Separately, Nufarm noted that it has terminated discussions with Sinochem Corporation, which intended to acquire all of the issued ordinary shares in the company for $12 cash per share.

Initially, Sinochem had made an offer of $13 per share.

According to the Nufarm Board, Sinochem’s offer significantly undervalued its business, while its proposal also had numerous conditions considered unacceptable.

Avoca Bids for Dioro Exploration

Avoca Resources announced today an unconditional offer for Dioro Exploration valued at $1.25 per share, which will comprise a cash and script component.

For each Dioro share held, accepting Dioro shareholders will receive $0.65 in cash and 0.325 shares.

The report notes that Avoca will also offer accelerated payment terms through which Dioro shareholders who agree to the deal will be sent their cash consideration and issued Avoca shares within three business days.

Avoca believes its offer represents 7.2% premium to the $1.165 implied value of the Ramelius offer made on December 24.

Avoca Resources already holds 44.85% of Dioro as well as share options representing an additional 3.2% of Dioro’s issued shares on a diluted basis.

ASX Movers

SMS Management & Technology Limited led the decliners in the S&P ASX 200 index with a loss of 2.5% followed by losses in Eastern Star Gas Limited of 2.4%, in JB Hi-Fi Limited of 2.3%, in Van Kampen Dynamic Credit Opportunities Fund 2.3% and in IOOF Holdings Limited 2.1%.

Energy World Corporation Limited led gainers in the S&P ASX 200 index with a rise of 15.0% followed by gains in Spotless Group Limited 7.1%, in OM Holdings Limited of 6.5% and in Wotif.com Holdings Limited of 6.1%.

Other Movers

Avoca Resources Limited rose 0.8% to A$1.86 after the gold producer offered A$115 million for Dioro Exploration NL. In addition, the Company will offer Dioro shareholders accelerated payment terms.

Aquarius Platinum Limited the engaged in mine development, concentrate production and investment increased 4.2% to A$7.30.

BHP Billiton plc added 1.0% to A$42.92 and the mining company is the most recommended stock among South Australian stockbrokers for the second successive year. Seven of 11 Adelaide brokers surveyed by The Advertiser ranked BHP in their top five recommendations for next year.

Newcrest Mining Limited the gold producer climbed 0.4% to A$35.28.

Nufarm Limited gained 2.8% to A$10.86 after the farm chemicals supplier said Tuesday that Sumitomo Chemical Co. has agreed to purchase a 20% stake in the company after the Melbourne-based company terminated takeover talks with Sinochem International Corp.

Santos Limited the oil and gas explorer advanced 0.6% to A$14.08.