Incitec Pivot draws up shortlist in fertiliser unit contest

Trading houses such as Sumitomo, Mitsui and Nippon could be interested.

Incitec Pivot is understood to have short-listed global fertiliser trading houses and private equity firms in the second round of the contest to sell its fertiliser distribution assets.

DataRoom understands that two private equity firms that had been looking at the business, BGH Capital and Pacific Equity Partners, are out of the race, as is Elders, and it is mostly strategic parties left.

The understanding is that there is some private equity interest and Japanese trading houses such as Sumitomo, Mitsui and Nippon could be in the line-up.

Offshore companies have looked at it in past auctions, including CF Industries, Yara International and The Mosaic Company.

Nutrien would be an obvious contender, but would be likely to face opposition from the Australian Competition and Consumer Commission, and it’s understood that suitors that may face those challenges would not be given preference in the sale.

Another wildcard suitor could be Wesfarmers, which has its own business in the same area operating on the country’s west coast, CSBP Fertilisers.

As earlier reported by DataRoom, information memorandums were released in January.

After two earlier attempts to offload the business, Incitec Pivot is now understood to be a committed seller under new chief executive Mauro Neves.

It has told the market there has been strong interest from a range of trade and financial parties, and hopes for a binding sales agreement by the middle of this year.

The sale of distribution assets comes as first round expressions of interest for the Gibson Island real estate process are expected to close on March 14.

Last time, suitors were not keen to buy the manufacturing part of the Incitec Pivot fertilisers business, but were motivated to buy distribution. This time, there’s the chance to buy just the distribution unit on its own, where all the value is considered to be.

Jarden is working on the sale, along with Macquarie Capital.

In its results delivered late last year, Incitec Pivot wiped $941m off the value of the fertiliser unit, suggesting it was now at about $400m. The writedown included $100m for its US operations.

Most of the rest was linked to the Australian manufacturing ­operations.

Its manufacturing operations are at Phosphate Hill, where it has faced gas supply disruptions and a shortfall in sulphuric acid from Mt Isa.

Incitec Pivot is looking to focus on its more successful commercial explosives operation, Dyno Nobel.