Dyno Nobel said March 11 that it has entered into a definitive agreement with Incitec Pivot Ltd. (IPL) under which IPL proposes to acquire all the shares in Dyno Nobel that it does not currently own. IPL bought 13 percent of Dyno Nobel in 2007 (GM Archives), prompting speculation that it would eventually seek to buy the remainder of the company.
Dyno Nobel’s board of directors unanimously approved the agreement.
The agreement values Dyno Nobel ordinary shares at A$2.80, implying a market capitalization for Dyno Nobel of A$2.3 billion and an enterprise value of A$3.3 billion.
“A combined IPL and Dyno Nobel will help strengthen Dyno Nobel’s position as one of the top two global explosive companies, and allow IPL to drive further shareholder growth through the expected ongoing global demand for explosives and fertilizer products,” said Peter Richards, Dyno Nobel CEO.
Dyno Nobel says the combination has compelling strategic merit, enabling both to benefit from the unique exposure to the explosives industry during a sustained commodities boom and the global fertilizer industry’s outlook for continued growth. Dyno Nobel says the merged group will be able to leverage Dyno Nobel’s significant North American manufacturing capacity and extensive distribution platform to increase sales into the fertilizer market. Completion of the Cheyenne, Wyo., expansion is expected in mid-2008.
Dyno Nobel has recently been in the news regarding its Moranbah ammonium nitrate project in Australia. The company suspended the project in December (GM Dec. 17, p. 1), but just last month said it is rethinking that decision (GM March 3, p. 1).
IPL, a major Australian fertilizer maker and supplier, has been doing well and on March 6 it said it expects 2008 earnings before interest and tax (EBIT) to be between $700-$730 million, an increase of up to 135 percent on 2007. It said the improved outlook is largely attributable to an increase in earnings from manufacturing flowing from higher international DAP prices, partly offset by adverse currency movements, higher sulfur costs, and lower production volumes at IPL’s plant at Phosphate Hill in North West Queensland.
IPL’s earnings guidance is that the average DAP price will range between US$760-$790/mt in 2008. It cited strong demand, supply disruptions in China, and record high input costs of phosphate rock, ammonia, and sulfur.
It said its Phosphate Hill production has been adversely impacted by railway line outages due to floods, the current interruption to metgas feedstock supply at the Mt. Isa sulfuric acid plant, and scheduled maintenance turnarounds. It is now expected that IPL’s ammonium phosphate production in 2008 will be approximately 900,000 mt, compared with the 2007 production of 978,000 mt. IPL said to mitigate future interruptions in phosphate production, it is investigating a range of capital investment opportunities to address the transport and storage of sulfur and sulfuric acid as well as the debottlenecking of the Mt. Isa sulfuric acid plant. These initiatives are expected to cost about $25 million in 2008 and 2009.