Incitec Pivot picks Indonesian SOE for fertiliser sale talks
Incitec Pivot has tapped Indonesia’s Pupuk Kaltim as the preferred buyer of its big Australian fertilisers business, fuelling expectations of a deal worth about $1.5 billion and a potential showdown with politicians and farmers.
Incitec Pivot has arranged site trips and due diligence for Pupuk Kaltim in recent days, according to sources involved in the talks, and turned away other suitors in favour of negotiating a bilateral deal with the group.
Farmers use Incitec Pivot’s nitrogen and phosphorus-based fertilisers to grow pastures and food. Peter Braig
Incitec Pivot’s fertilisers business is Australia’s biggest fertiliser manufacturer and distributor, with about 50 per cent manufacturing and distribution market share in the agriculture-heavy eastern Australian states. Farmers use its fertilisers to improve pastures and grow crops, making it an important part of the country’s food industry.
The fertilisers business makes about $2 billion revenue and about $200 million in earnings in a normal year; however, there is considerable volatility caused by global fertiliser prices and Australia’s agricultural cycle.
The unit expected to be worth about $1.5 billion.
An Incitec Pivot spokesman declined to comment on Wednesday.
Incitec Pivot shareholders are broadly supportive of the sale talks. The company’s shares are down 20 per cent this year, have largely traded sideways for the past 15-years, and investors are keen to see the board explore ways to create value.
Blake Henricks, a portfolio manager at Firetrail Investments in Sydney, says the fertilisers unit accounts for less than one-quarter of Incitec Pivot’s underlying value and could be worth more in the hands of a strategic buyer. Firetrail owns a 5.12 per cent stake,
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