Incitec Pivot’s fertilisers attract growing interest

Incitec Pivot’s Phosphate Hill plant

Developments surrounding the strategic review of the Incitec Pivot fertiliser division are expected to be known next month, but already parties are understood to have expressed interest.

Working on what is expected to be a sale or demerger of the operation is investment bank UBS, which some believe has already fielded inquiries from potential suitors.

Earlier, it was understood that groups including Wesfarmers and Norwegian chemical company Yara International were likely to be prospective buyers.

Australian agricultural company Elders was understood to be hoping to have a look, while its rival Landmark, owned by Canada’s Nutrien, was expected to be in the mix for the business, which could be worth about $700m.

One possibility being discussed is whether the Indonesian industrial company Pupuk Kaltim could be a suitor, although it is not thought to have shown any early interest.

Pupuk has five ammonia and five urea plant units in one location in Bontang and is thought to have been involved with deals with Incitec Pivot in the past.

Developments on the strategic review are expected to be announced to the market when the company reports its results on November 12.

Investors have been backing the move to spin off the division, with its earnings volatility weighing on its share price performance due to its exposure to the unpredictable agricultural sector.

Last year, the Incitec Pivot chemicals division dispatched 2.2 million tonnes to the domestic market for agriculture.

But while a demerger has not been discounted, a growing expectation is that the business will be sold, with a trade buyer likely to look through the current low point in the cycle.

The fertiliser division’s most valuable asset is its Phosphate Hill site in northwest Queensland that manufactures ammonium phosphate fertilisers.

Over the past 10 years, Phosphate Hill is understood to have made about $103m of annual earnings before interest and tax on average.

The average di-ammonium phosphate (DAP) fertiliser price for Phosphate Hill is $US445 per tonne, compared to the current spot price of $US308 per tonne.

With the fertiliser division coming up for sale, it is likely to be a busy few months for industrial bankers, who will also be working for parties eager to acquire the Asia-Pacific arm of Owens Illinois.

Flyers for the Owens Illinois division are in the market and information memorandums are expected to be out within the next fortnight.