Nufarm expands its Latin American presence by acquiring its Brazilian affiliate, Agripec

Nufarm has agreed to acquire the outstanding stake in its Brazilian agrochemical affiliate, Agripec, that it does not already own. The Australian multinational plans to purchase the 50.1% stake for R$350 million (US$171.5 million), which values Agripec at R$700 million. The acquisition of the equity stake will take effect on June 1st, with completion scheduled for mid-August. Final contracts and regulatory approvals are still to be finalised, Nufarm points out.

Nufarm acquired a 49.1% stake in Agripec in late 2004 (Agrow No 458, p 1). The move was aimed at expanding Nufarm's presence in Latin America and profiting from a major agrochemical market. However, Agripec's profit contribution fell short of expectations due to a deterioration in the Brazilian market. Agripec contributed a net profit of just Aus$1.9 million (US$2.5 million) in fiscal 2006 compared with Aus26.9 million a year earlier (Agrow No 505, p 6). Agripec's sales also declined over this period, but Nufarm's 49.1% ownership meant that the Brazilian firm's revenues were not recorded by Nufarm in its results. It intended to move to 100% ownership "when the time is right" (Agrow ibid).

In view of confidence in the recovery and sustained growth of the Brazilian agricultural sector, Nufarm now believes that the time is right to acquire the rest of Agripec. The move has also been influenced by Nufarm's intention to look at other opportunities in the market, Nufarm's managing director, Doug Rathbone points out. "Brazil represents one of the world's most exciting agricultural growth markets and the purchase of the balance of Agripec will give Nufarm a valuable platform on which to develop new business opportunities in South America," Mr Rathbone says.

The credit issues that have adversely impacted the business in Brazil over the past 18 months will require "careful ongoing assessment and management", Nufarm points out. However, stronger commodity prices and forecasts of increased crop plantings for the next two years are expected to help Agripec achieve "acceptable" profitability levels that would meet Nufarm's investment return targets, the company notes. "We have a strong management team in place and a good understanding of what is required to build Agripec into a larger and more profitable business," Mr Rathbone asserts.

Agripec's major shareholder and president, Beto Studart, will step down from his position on completion of the acquisition. The company's senior management group will remain in place, with Nufarm appointing Marcos Lobos as the new president. Mr Lobos has worked in a number of senior roles with Nufarm and is a Nufarm-appointed director of Agripec. Agripec generated sales of some R$350 million in 2006 and had a share of about 8% of the Brazilian agrochemical market. The company has strong positions in glyphosate, phenoxy and other herbicides, as well as valuable fungicide and insecticide ranges, Nufarm says. More than 60% of Agripec's sales are made in the soybean sector. However, new product registrations are aimed at expanding its sales into other major crops, such as maize, cotton, citrus fruit and sugar cane.

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