Nufarm to expand in UK and US

Nufarm has acquired the UK agrochemical manufacturer, A H Marks (Wyke, West Yorkshire), and agreed to purchase the US generic pesticide firm, Etigra (Cary, North Carolina). The Etigra deal is expected to be completed by the end of March. The combined purchase price for the two companies will be Aus$236 million (US$221 million), including Aus$61 million in assumed debt from A H Marks. Nufarm will fund the cash component of the purchase price with a new share placement, which is expected to raise some Aus$200 million.

The purchase price for A H Marks is Aus$162.2 million. The company manufactures herbicides and herbicide intermediates. It is a major producer of phenoxy herbicides, such as 2,4-D and MCPA, and a leading supplier of intermediates for phenoxies and arylyoxyphenoxy propionate graminicides, Nufarm points out. The company has supply agreements with several multinationals, including a toll manufacturing deal with Nufarm, which accounts for about 20% of A H Marks' sales.

The acquisition will strengthen Nufarm's global leadership in phenoxy herbicides, according to its managing director, Doug Rathbone. "The addition of the A H Marks business expands our production capacity, enhances our product development opportunities, strengthens our global regulatory position, extends our supply relationships with other major companies, and provides additional brands for our portfolio of phenoxy herbicides," Mr Rathbone says.

A H Marks' sales amounted to some £62 million ($123 million) in 2007, of which crop protection accounted for 82% and fine chemicals 18%. The acquisition includes synthesis and formulation plants, laboratories, offices and warehouses. Nufarm plans to increase production at the Wyke facility and to support a number of new product development programmes. "Nufarm has been operating at full production capacity for a number of our leading phenoxy products," Mr Rathbone notes. "We are seeing increased opportunities associated with the use of these products in genetically modified crops and glyphosate resistance management programmes."

A H Marks has suffered from a lack of presence at the branded distribution level, Nufarm points out. Its integration into Nufarm's broader geographic plant will "add significantly to the value that can be extracted from its manufacturing and product positions", Mr Rathbone adds.

The planned Aus$74.2 million purchase of Etigra is expected to strengthen Nufarm's position in several valuable market segments in the US. Etigra markets more than 50 products in the turf, ornamental, industrial vegetation management (IVM), forestry and crop sectors. "A number of Etigra's product registrations will enable us to secure additional positions in important crop segments, including the cotton market," Mr Rathbone says.

Etigra's sales amounted to US$34 million in 2007, with the turf and ornamental sector accounting for 63% of the total. Fungicides and insecticides make up 60% of Etigra's revenues, thereby complementing Nufarm's predominantly herbicide-based portfolio. Etigra will be integrated into Nufarm's US turf and specialty business.

 Etigra's sales by sector  [twin pies side by side if possible] 

Turf and ornamentals                      63% 

Industrial vegetation management     16% 

Agriculture                                     21% 

Etigra's sales by category 

Insecticides                                    35% 

Herbicides                                      27% 

Fungicides                                      25% 

Others                                           13% 

The acquisition of A H Marks is expected to boost Nufarm's after-tax net profit by Aus$1.2 million in the remaining five months of its fiscal 2008. In fiscal 2009, Nufarm expects a net profit contribution of Aus$13.4 million, with synergies valued at Aus$14.8 million. The planned purchase of Etigra should raise Nufarm's net profit by Aus$4 million in the year to July 31st 2008, rising to Aus$11.3 million in fiscal 2009.