Pupuk gets serious about Incitec Pivot; hires advisers

afr.com:

It’s one of the largest players in the sector in Asia, and now Pupuk Indonesia appears to be getting serious about Incitec Pivot’s fertiliser business.

The $5.4 billion ASX-listed group had been attempting to split its fertiliser and explosive divisions, but confirmed reports in Street Talk that it had received “a number of approaches” about the former. “The board’s assessment of a potential sale is being considered alongside the proposed demerger, which remains a strategic priority for the board,” it added.

Now Street Talk can report that Pupuk has engaged both Citi and Gilbert+Tobin as it continues to work on a potential proposal. It is early days yet, sources said on Sunday, but having on-board advisors clearly signals the Indonesian government-backed company’s intent. In particular, Gilbert+Tobin’s team means business when it comes to M&A.

Jeanne Johns has left Incitec Pivot in the midst of a demerger. Michael Quelch

Incitec Pivot has been adrift for months, with Christine Corbett left her role as chief executive designate of the division in another sign that Incitec’s proposed split could be falling apart. Jeanne Johns, the company’s chief executive who helped drive the demerger strategy, is also gone.

Citi analyst Paul McTaggart, writing to clients after the company confirmed that it was considering selling the fertiliser business, said the division had an enterprise value of some $1.8 billion. “We continue to view that the market debate around the potential value of the two businesses will continue given a weaker pricing environment,” he wrote. “Our analysis suggests the spin-off may have incremental upside value, but a softer pricing environment poses a key risk. Moreover, given subsequent [management] changes,