29 September 2009

Chinese chemical firm looks for deal Down Under

As more and more Chinese companies are looking to grow off the mainland, Chinese state-owned chemical firm Sinochem has a $2.5 billion offer on the table for Australian farm chemicals group Nufarm.

One area the Chinese company may find a high hurdle is in gaining Australian foreign-investment approval, which has been difficult to predict, especially when state-owned Chinese firms seek to take control of local assets.

Australia’s Foreign Investment Review Board held off two major Chinese investments in Australia this year, involving local companies that own large mineral deposits.

In contrast, Nufarm is in the manufacturing industry where the foreign investment regime has generally been more liberal.

The main attraction for Sinochem is Nufarm’s global distribution network, which includes businesses in Asia, South America, and Europe.

Nufarm reported a 2.6% drop in net profit on Monday and flagged a challenging operating environment in the current year.

Resource-hungry China has been looking to buy Australian mining companies, including a $2.9 billion bid by state-owned Yanzhou Coal Mining Co for Felix Resource. So far this year, Chinese companies have invested about $5 billion in Australian companies.

Last month, China’s biggest steelmaker, Baosteel, agreed to buy a 15% stake in iron ore explorer Aquila Resources for $240 million.

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