‘Pivotal step’: Incitec sells troubled Waggaman ammonia plant in the US for $2.5bn
Incitec Pivot can now turn its focus to spinning out its fertiliser business after offloading the troubled Waggaman ammonia plant in the US for $2.5bn.
Explosives and fertiliser giant Incitec Pivot has offloaded its troubled US manufacturing facility in Louisiana to CF Industries for $US1.675bn ($2.5bn)
The Waggaman facility has struggled with mechanical issues and outages over the last few years.
Incitec announced in November that it would delay the spin out of its fertiliser division while it undertook a strategic review of the ammonia plant.
The company on Monday said in addition to the sale of the facility it had secured a 25-year ammonia supply agreement with CF for up to 200,000 short tonnes of ammonia per annum to support its Dyno Nobel Americas (DNA) explosives business.
The value allocated to the ammonia supply agreement is approximately $US425m which will be offset from the cash proceeds of the sale agreement for Waggaman.
Incitec expects to reap total cash proceeds from the deal of $US837m.
Incitec managing director and CEO Jeanne Johns said the sale represented a pivotal step in the execution of the company’s strategy to enhance the focus of the businesses on the high value technical and service needs of its explosives customers.
“We are also delighted to be partnering with CF Industries, a world-class producer of ammonia with an excellent manufacturing and safety track record,” she said in an ASX statement after the market closed on Monday. “We are looking forward to this journey as we seek to deliver long-term sustainable value creation for our shareholders and stakeholders.”
The divestment of Waggaman remains subject to US antitrust regulatory clearance and the completion of other customary closing conditions.
Under the terms of the deal, these conditions must be satisfied within 24 months of execution of the agreement.
The supply agreement with CF is for an initial 15-year term with the option to extend by two further five year periods at Incitec’s discretion.
About 30 per cent of Waggaman’s output has traditionally gone to Incitec’s US explosives business, with the rest sold on the open market.
In November when it announced its annual net profit of $1.01bn, Incitec said it had received multiple approaches from credible buyers considering acquiring the Waggaman ammonia plant.
While the company did not name any of the would-be buyers, Ms Johns said Incitec believed it would cost at least $US1.5bn to build a replacement plant in the US.
She also said the delay caused by the Waggaman review should not be seen as a sign Incitec was wavering on a split of its business. The company had at one stage hoped to put the demerger of its fertilisers business to shareholders this year.
Incitec Pivot shares closed down 3.4 per cent at $3.12 on Monday.
More Coverage
R.M. Williams digs heels in over Adelaide rental dispute
R.M. Williams is facing a legal stoush in its spiritual home of Adelaide with its former landlord taking it to court for about $200,000 in disputed rent and other costs.
Gupta’s woes spread to NSW as coal workers stood down
Workers at Tahmoor Coal in NSW have been stood down on full pay and production curtailed, as rumours swirl that Sanjeev Gupta’s debt worries have spread beyond Whyalla.