Melbourne-based fertilizer and explosives company Incitec Pivot Ltd. (IPL) announced on July 10 that it has ceased negotiations with Indonesian company PT Pupuk Kalimantan Timur (PKT) for the potential sale of its Incitec Pivot Fertilizer (IPF) business.
IPL confirmed in May that it was in advanced negotiations with PKT (GM May 17, p. 1) and the two have been in talks since last summer (GM July 28, 2023). PKT operates 13 plants, including five ammonia plants with capacity of 2.7 million mt/y, five urea plants with capacity of 3.4 million mt/y, and three NPK plants with capacity of 300,000 mt/y.
In a July 10 release to the ASX, however, IPL said the decision to walk away from the deal followed careful consideration of how to maximize value for shareholders while balancing the risks of completing the transaction in a reasonable timeframe.
“Throughout the sale negotiations with PKT, we were focused on completing a sale transaction in a timely manner to allow us to commence our on-market share buyback of up to $900 million,” said IPL CEO and Managing Director Mauro Neves. “We have determined we are unlikely to achieve this outcome with PKT in an acceptable timeframe, and as a result we made the decision to cease negotiations with them.”
Analysts had earlier suggested several possible sticking points to the sale (GM Aug. 11, 2023), including availability and supply of natural gas and sulfur for the company’s Phosphate Hill ammonium phosphate plant; gaining approval from Australia’s Foreign Investment Review Board for the sale of Australia’s only phosphate producer; and farmer fears that the Australian phosphates might go to Indonesia instead of Australia.
Neves said IPL will “continue to assess options for the structural separation” of its two businesses and said the company’s long-term goal remains to offload IPF. He cautioned, however, that IPL is “not actively engaged in any negotiations” at this time.
“Our IPF business remains focused on value-accretive market-share growth and is in a strong position for the agricultural season ahead,” he said. “The structural separation of the business and the potential transaction of the fertilizer business is still the strategy. The strategy hasn’t changed; we have to find another way to execute it.”
Neves said IPL will continue to manage the Dyno Nobel explosives and IPF businesses separately.
“IPF will continue to deliver on its strategy of providing value-add fertilizers and soil-health services that increase productivity for agricultural customers,” he said. “Dyno Nobel will focus on delivering its strategy to expand its position as a leading global, premium explosives business that provides its customers with safe and cutting-edge technology, solutions and services.”