Nufarm Limited will significantly strengthen and consolidate its position in seeds with the acquisition of two Australian canola seed businesses.

Nufarm announced today that it has reached agreement to purchase the business of Australia’s leading canola seed production and marketing company, Dovuro Seeds, and the shares of Australian based specialty canola seed breeding company, Nutrihealth Pty Ltd.

Both acquisitions – involving separate transactions - are expected to be completed by June 1. The proposed Dovuro acquisition is subject to final due diligence. Total consideration is approximately $34 million and will involve a combination of cash and Nufarm equity.

Dovuro Seeds, headquartered at Horsham in Victoria, supplies Australia’s most extensive range of herbicide tolerant (non GM) and conventional canola seed varieties, as well as seed treatment services and quality control systems.

The Dovuro acquisition involves all intellectual property and assets of the business.

Nutrihealth Pty Ltd specialises in the development, field production and marketing of a value-added canola oil called ‘Monola’. This product has properties that enable it to be marketed as healthier (low in saturated fats and no trans-fats) and more economic for commercial scale deep-frying (greater stability; extended shelf life; fewer off-flavours) than standard canola oils.

The acquisition involves all intellectual property relating to the ‘Monola’ business, including the germplasm, and a closed loop business system incorporating other links in the chain to market. A non-specialty canola breeding program is also included in the transaction.

Nufarm’s Managing Director, Doug Rathbone, said the acquisitions will help consolidate Nufarm’s expanding position in the Australian seeds business.

Existing interests include Nugrain Pty Ltd, Ag-Seed Research Pty Ltd and Access Genetics Pty Ltd. Across these businesses, Nufarm is involved in the breeding and development of new canola, wheat, oats and field pea varieties.

“These purchases will strengthen our germplasm base and add to our highly skilled plant breeding and field operations team, based at Horsham in Victoria.

“An involvement in seeds is a logical extension of Nufarm’s leadership position in the Australian crop protection market,” Mr Rathbone said. “Growers recognise the value associated with seed varieties that offer improvements in yield and quality or – as is the case with ‘Monola’ – provide distinct benefits to food processors and producers, and to consumers.

“Nufarm is able to utilise its existing distribution channels and achieve linkages with the company’s chemistry business via seed treatment solutions and the herbicide tolerant ‘Clearfield’ system (BASF technology distributed in Australia by Nufarm).”

The combination of these acquisitions will complement Nufarm’s existing interests in seeds and give the company a market leading position in canola across conventional, hybrid and specialty seed products.
Mr Rathbone said the combined earnings from the new businesses will meet Nufarm’s EVA return hurdle in the first full year of operations (financial year 06/07), with returns expected to grow strongly thereafter.

Dovuro Seeds currently supplies some 50% of new seed sold into the Australian canola market. Approximately 70% of total canola hectares (05/06 estimate is approx. 1 million hectares) involves the planting of new seed. The company has an extensive program of national trials, delivering growers a wide range of triazine (herbicide) tolerant and conventional canola varieties. Distribution is via major rural resellers including the Elders and Landmark networks.

Nutrihealth has Australia’s most advanced breeding program in the specialty HOLL (high oleic / low linolenic) canola segment. Demand for HOLL canola is growing steadily on a global basis, with current major markets for HOLL canola oils being the United States, Canada and Japan. In a closed loop system, Nutrihealth licenses its seed to growers, who receive a premium price for their crop, which is then sold to a crusher before being passed through to the refiner who refines, packs and markets the end product. In 2007, Nutrihealth expects to plant some 25,000 hectares of ‘Monola’ grain.

Canola is a seed crop grown for the production of vegetable oil. It is the third largest field crop grown in Australia (behind wheat and barley). Canola continues to grow in significance in terms of both the value of oilseeds and total crop production. In Australia, sowings are typically 1 million to 1.4 million hectares depending on season and relative pricing of wheat v canola. Canola contibutes agronomically in the "rotation" to weed and disease control and helps with improving soil structure.