Incitec Pivot’s painfully protracted talks to divest its fertiliser division to state-owned Indonesian group Pupuk Kaltim have rival suitors starting to mobilise.
In July, Street Talk revealed fertiliser and explosives group Incitec Pivot fielded several approaches for its underperforming fertiliser division. At the time, the $5.2 billion ASX-listed company was attempting to split its fertiliser and explosive divisions but faced vocal investor opposition.
Later that month, we reported that Pupuk – one of the largest players in the sector in Asia – had emerged as a potential buyer, engaging Citi and Gilbert+Tobin to work up a proposal. Sources said Pupuk lobbed a non-binding offer that blew other prospective acquirers out of the water and has been in discussions with Incitec Pivot since, finishing up due diligence late last year.
Now, six months down the track, Street Talk can report Pupuk’s still at the table. But sources said there were plenty of speed bumps slowing down the deal, not least the residual risk of selling what’s a critical asset to an Indonesian SOE.
Incitec Pivot’s fertilisers business is Australia’s largest, with about a 50 per cent market share in manufacturing and distribution on the eastern seaboard of Australia.
This means the potential sale has attracted scrutiny from the Foreign Investment Review Board; it’s a foreign buyer seeking to gain control over a significant domestic phosphate supplier – a critical element in meeting Australia’s food needs. Sources said an export cap has been proposed to get over this hurdle, but this has internal decision makers – ie the board – concerned it won’t be the hoped-for clean exit.
Second, there’s uncertainty surrounding the future of Incitec Pivot’s gas supply agreements. The company uses gas to turn raw material into fertiliser. Pupuk has no means of underwriting gas in Australia and is said to have punted that problem back to Incitec to construct some sort of agreement.
With negotiations dragging, it is not surprising rival bidders are keeping a close eye on the situation. Incitec Pivot is advised by Macquarie and UBS.
Read the full story tomorrow and more on the Street Talk page.
