The UK's Emerald Energy and Nufarm of Australia don't have much in common, on the face of it. One drills for oil and gas, the other distributes herbicides and pesticides. But both have agreed to be acquired by Sinochem, China's largest chemicals trader, in strikingly similar deals. The parallels illustrate the growing verve of outbound M&A efforts by China's state-owned enterprises.
Both targets are fast-growing mid-caps, run by strong characters who are also the dominant shareholder. Sinochem, sensing willing sellers, struck at a moment of weakness. Nufarm had put out three profit warnings this year after a slump in the price of its key herbicide, glyphosate, while Emerald lacked cash to upgrade wells in Syria and Colombia. In both cases, Sinochem will leave management largely intact.
The deals were also leaked, to the professed chagrin of advisors on both sides. But for Sinochem, the roughly two-month gaps between leak and announcement seem to have dissuaded rival bidders – who can compete with a national champion-elect? The all-cash offers, when they eventually came, were at modest, but not insulting premiums to the last traded price.