Australian herbicide manufacturer Nufarm has agreed to sell its South American crop protection and seed treatment assets to its biggest shareholder, Japanese Sumitomo Chemical Company, for AUS$1.2bn (US$812M).

The deal would help pay down debt amid a severe domestic drought, Reuters said on 30 September.

“Following the transaction, Nufarm will operate a diversified global crop protection business and a proprietary seed technology business with an attractive omega-3 canola commercialisation opportunity,” Nufarm said.

As part of the deal, Nufarm and Sumitomo would enter a two-year supply agreement, under which Nufarm would provide a continued supply of certain products to the South American businesses. Existing agreements between the two firms for product development and commercialisation would be extended to 2025.

Nufarm said the deal – which included assets in Argentina, Brazil, Chile and Colombia – was expected to be completed in the first half of 2020, subject to approval of its shareholders and relevant South American regulatory bodies.

The firm would focus on its major European, North American and Asian Pacific agricultural markets once the deal had closed. It also planned to undertake a review of corporate costs to identify ways to generate future savings.

An ongoing drought in Australia and supply chain challenges from China had placed Nufarm in a defensive financial position, Global AgInvesting reported on 4 October.

In August, Nufarm also sold AUS$97.5M (US$66M) worth of stock to Sumitomo, which it intended to buy back once the asset sale was completed, Reuters said.

Sumitomo said the deal would help triple its crop protection revenue in South America, surpassing revenue from the North American region.

Nufarm is a manufacturer of phenoxies, a class of herbicides that controls and eradicates broadleaved weeds.