Incitec Pivot break-up a possibility

The sale of Incitec Pivot’s fertiliser unit has been a drawn-out process.

As the sale process for the Incitec Pivot fertiliser unit drags on, the latest development is that parties are putting forward offers for parts of the business, which may signal that a break-up could be the ultimate outcome.

Apparently, the negotiations with the Indonesian party looking at the business, believed to be Pupuk Kaltim, are still progressing and the understanding is that Foreign Investment Review Board approval has not been gained.

Yet it’s a surprise to many that the negotiations have been drawn out for so long.

Investors surely will be hoping for some sort of outcome one way or another when it is next due to report results in May.

Senex Energy is not thought to be around the hoop, but has held discussions in the past.

Sources say offers have been made mostly for the unit’s up-country blending facilities, although the understanding is that the business is not currently considering a break-up.

Market experts believe it makes sense to split off the distribution part of the fertiliser business and sell it to a different party, while another party would own heavy manufacturing.

Investment banks Macquarie Capital and UBS have been working on the sale.

When they ran an earlier process, it was understood to have attracted bids from groups such as BGH Capital for prices as low as $400m, although most believe that, should a sale happen, it would be for closer to $1bn.

Incitec Pivot has faced gas disruption at its Queensland Phosphate Hill fertiliser manufacturing operations.

The unit generated a 75 per cent fall in its earnings before interest and tax for the 2023 financial year to $153m.