Advisers working for the $6bn listed Incitec Pivot have again been sounding out prospective buyers for the company’s fertiliser operation, with Elders, Nutrien and Ridley thought to have been approached.
When it was previously on the market, parties put in offers for parts of the fertiliser business, hoping to cherry-pick assets such as its up-country blending facilities.
The most appealing part of the operation is considered to be the fertiliser distribution unit, with the manufacturing business seen as a liability for any suitor.
Earlier negotiations with Indonesian buyer Pupuk Kaltim failed to result in a deal.
Analysts believe it makes sense to split off the distribution unit of the fertiliser business and sell it to a different party, while another party would own heavy manufacturing, consisting of the Phosphate Hill monoammonium/diammonium phosphate plant and a sulphuric acid plant at Mount Isa.
It closed its Gibson Island ammonia manufacturing plant in Brisbane last year.
Macquarie Capital and UBS had been working on the previous sale, following one launched shortly before the pandemic in late 2019.
That earlier process was understood to have attracted bids from groups such as BGH Capital for prices as low as $400m, when the asking price was closer to $1bn.
Incitec Pivot has faced gas supply disruptions at its Phosphate Hill operations and a shortfall in sulphuric acid from Mt Isa, slashing its earnings.
The sulphuric acid plant collects and cleans sulphur dioxide from Glencore’s copper smelter in Mt Isa before converting it to sulphuric acid. It is capable of producing up to 3700 tonnes.
Morningstar says the fertiliser unit accounts for about a third of its fair value estimate on the stock or about $1.20 per share, which puts a value on the unit of about $1.2bn.
Incitec Pivot said at its recent investor day it was looking at all options for the fertiliser unit, including selling land or the Gibson Island unit or breaking up. Analysts believe the company remains keen to part with the business.
Major synergy opportunities exist for groups like Ridleys, Nutrien and Elders.
But the customers of Incitec Pivot Fertilisers may not want to deal with Nutrien and Elders as owners, given they would be rivals.
A group like the $800m listed Ridleys, which distributes feed and other animal nutrition products, would not want to deal with the manufacturing plant. The Mt Isa unit is the only part of the business seen as having value for some industry observers.
The distribution unit could sell for as much as $800m, which could create opportunities for a scrip deal with Ridleys, given this is about the size of its market value and there would be synergies in areas such as marketing and distribution. The unit’s earnings before interest and tax for 2022-23 fell by 75 per cent to $153m.
Healthscope firmly in the sights of Bain
Bain Capital is closing in on its next big target struggling with too much debt – the country’s second-largest hospital operator Healthscope.
Incitec Pivot’s fertiliser price likely too high for some
Potential bidders have been given information about Incitec Pivot’s fertiliser unit, but the jury’s still out as to how much they will be prepared to pay..