Australia's largest crop protection company Nufarm (ASX: NUF) has managed to pull off an asset sale worth more than 60 per cent of its market capitalisation, despite a volatile global market that has depressed asset values.
Within weeks of passing a major regulatory hurdle in Brazil, Nufarm announced today it had completed the sale of its South American crop protection and seed treatment operations.
Worth $1.188 billion, the sale to Japan's Sumitomo Chemical Company includes operations in Brazil, Argentina, Colombia and Chile.
Nufarm confirms the net sale proceeds have been received.
"The sale of our South American businesses significantly strengthens our balance sheet and enables us to focus on improving cash generation across our businesses," says Nufarm managing director and chief executive officer Greg Hunt.
The price paid represents a multiple of around 10x FY19 underlying EBITDA.
When the announcement was made in September last year, Hunt said it presented compelling value to shareholders while bringing an opportunity to refocus on other parts of the business.
Back then shares were then trading at levels 19 per cent higher than today.
"We have a very capable management and commercial team in South America who have built a strong distribution network and loyal customer base," Hunt said at the time.
"This is reflected in the growth and stabilisation of earnings in the business over the past five years.
"The significant reinvestment we have made in our European, Nuseed and North American businesses in recent years, along with the next phase of transformation in our Australian business, is expected to deliver earnings growth and improved returns for shareholders in the coming years."
The announcement comes at an uncertain juncture for large-scale transactions globally. Just yesterday, prepaid and gift card provider EML Payments (ASX: EML) announced it was able to negotiate down its upfront purchase price for Prepaid Financial Services (Ireland) Limited (PFS) by 41 per cent.
EML confirmed today the transaction had been completed.Never miss a news update, subscribe here. Follow us on Facebook, LinkedIn, Instagram and Twitter.
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