Nufarm buyout isn’t happening and here are the reasons

Nufarm’s Seed Technologies sells seeds for crops such as canola.

Recent trading by Nufarm directors likely points to three things.

First, the company is unlikely to be in talks over a buyout deal because board members with inside information would not be allowed to trade the stock. Second, they believe the group is under­valued. And third, there’s no plans for an equity raising.

Directors would not be able to trade with the knowledge that a raise was coming, and shares ­usually fall amid a raise so it would not make sense to buy them now.

The company’s share price continued to fall last week after its disappointing results, and its market value at $896m is now the same as the book value of its Seed Technology unit alone.

Among the directors to have traded are Lynne Saint, Frederico Tripodi and David Jones, whose holding changed on May 27 after he outlaid $201,792 on 80,000 shares at $2.52.

Activist investors on Nufarm’s register believe rather than weighing a sale for just its Seed Technologies unit, which is subject to a strategic review through UBS, it would be better off placing the whole company on the block.

Nufarm shares have fallen 37 per cent in a month.

Groups such as BP and the KKR-backed Advanta have expressed interest in Seed Technologies but are not keen buyers of Nufarm’s other part of the ­business which operates in crop protection.

It’s net debt at $1.36bn has many sounding the alarm over a need to raise equity.

Nufarm reported a 39.5 per cent fall in net profit to $29.75m for the six months to March 31.

The Seed Technologies unit reported $249m of interim revenue and underlying earnings before interest and tax of $15.9m, a 71 per cent decline on the previous corresponding period on the back of lower licensing revenues and lower margins.

Seed Technologies sells seeds for crops such as canola; its omega-3 seeds business is considered its growth platform.

Nufarm has activist investors on its register such as John Wylie’s Tanarra Capital, L1 Capital and Allan Gray, who are keen to see crop protection operations split from Seed Technologies.