Fernz swoops on chemical firm to expand US base

By Mark Reynolds

Chemicals group Fernz Corporation has sealed a couple of deals in the United States that are likely to boost its turnover by several hundred million dollars over the next few years.

Fernz yesterday agreed to buy Chicago-based Riverdale Chemical Company, a firm with $75 million in annual sales. More significantly, Riverdale's customer lists, product registrations, sales staff and manufacturing machinery will enable Fernz to increase its United States earnings substantially.

"Riverdale gives us market access that we can grow from," said Doug Rathbone, managing director of Fernz's agricultural chemicals subsidiary, Nufarm.

"It gives us a presence in product [lines] we have not had and will allow us to broaden the range of customers for products we already produce," he said.

In a further boost to its earnings outlook, Fernz also confirmed it had signed a licensing agreement that would allow it to sell seeds resistant to Monsanto's Roundup brand of weedkiller.

These so-called Roundup Ready seeds, sometimes referred to as magic-bean technology, allow genetically engineered (trans-genic) crops to withstand doses of Roundup that would otherwise kill them. Fields can be sprayed with Roundup even after plants have started to grow.

Fernz has an agreement to formulate and sell in North America from next year a product called glyphosate, which is the key ingredient for a Roundup clone. That means Fernz will be able to sell United States farmers both weed-resistant seeds and the Roundup-like weedkiller they are resistant to.

Around 10 per cent of main crops in the United States are grown using trans-genic seeds, but that is expected to double over the next three years.

The Roundup market in the United States was worth about $2 billion last year, so obtaining only a small share of those sales would boost Fernz's earnings significantly.

Fernz's managing director, Kerry Hoggard, said the Riverdale purchase was a big step forward.

Fernz paid for the family-controlled company by issuing five million ordinary shares at $5.32 a share, compared with its latest on-market price of $5.70 a share. Four million shares were placed with professional investors by brokerage J.B. Were, while the remaining million were issued to Riverdale executives who planned to stay with the company under its new ownership.

Riverdale's earnings before interest and tax were about $9.5 million in its latest financial year.

Fernz has been working with Riverdale since 1989.

Pictured: Farmers planting genetically-engineered seeds can spray their fields with Roundup even after the plants have started to grow.