Jarden tapped for Incitec Pivot fertiliser sale

Incitec Pivot hopes it will be third time lucky for the sale of its fertiliser unit. Picture: iStock

Incitec Pivot’s freshly appointed management has brought in a new investment bank to handle the sale of the distribution arm of its fertiliser business as looks to clear the decks and focus on its future as a mining explosives play.

The move to break up the fertiliser unit and sell off the distribution arm was first flagged by DataRoom and announced when the company delivered its annual result on Monday. It came as the company wiped $941m off the valuation of the Australian Incitec Pivot fertiliser division.

The bank being added to the ticket is Jarden. The move comes as new boss Mauro Neves de Moraes takes over.

UBS and Macquarie Capital have previously made efforts to sell the fertiliser business and Macquarie still has a role.

This time, though, it appears the group is motivated to move the fertiliser business off its books and look to a future focused on its more successful commercial explosives operation Dyno Nobel, so it is expected to take a realistic approach to price.

Former Incitec Pivot management held out for top dollar when trying to sell its fertiliser unit twice before, and opposed a business break-up.

Most buyers were keen to buy the distribution arm and few were interested in taking on the more problematic manufacturing operation.

But now, with distribution available separately, the sale process is likely to involve plenty of competitive tension.

Australian-listed trade buyers like Elders and Ridleys and global strategics like The Mosaic Group, CF Industries and Nutrien, which has a major Australian presence, will be going head to head with private equity firms such as Pacific Equity Partners and BGH Capital, which have been sounded out by investment bankers in recent months.

It’s clear the market is in favour of the decision, with shares closing higher, despite a thumping $311m loss and an overall $1bn writedown to the fertiliser unit. The writedown included $100m for its US operations. Most of the rest was linked to the Australian manufacturing operations.

It leaves the company to deal with the problems at its Phosphate Hill operations, where it has faced gas supply disruptions and a shortfall in sulfuric acid from Mt Isa, slashing its earnings.

The sulfuric acid plant collects and cleans sulphur dioxide from Glencore’s copper smelter in Mt Isa before converting it to sulfuric acid. It can produce total sulphuric acid supply of 1.3m tonnes per annum.

While there are plans to close the plant, the distribution assets will not be impacted given alternative supply options.

The sale process will get going in earnest early next year. The book value is now $414.3m, compared to more than $1bn in the past.

Private equity in the past has put forward offers of less than $500m for the fertiliser business, but this was when manufacturing was also part of the picture, although they will be still keen to snap up the operation at an opportunistic price.