Ridley Corporation moves into fertiliser distribution with $300m Incitec Pivot acquisition from Dyno Nobel
Agricultural services company Ridley Corporation (ASX: RIC) has proposed a $300 million deal to acquire Dyno Nobel’s (ASX: DNL) fertiliser distribution business and a $75m option to acquire its Geelong North Shore property.
IPF (Incitec Pivot Fertilisers) Distribution is one of Australia’s leading fertiliser suppliers, with a network of 13 primary distribution centres supported by seven regional service centres and three Easy Liquid distribution sites.
The business holds a 46% market share on the east coast and recorded 2.2 million tonnes of distributed product for the year ending September 2024.
Transaction synergies
Ridley expectes the IPF acquisition to leverage its existing brand, capabilities, infrastructure and financial strength across commodity risk management and logistics while building on key relationships with existing customers.
The company is projecting the deal will realise synergy savings of around $7m per annum over a two-year period.
These will arise primarily from the consolidation of back office and support costs.
Deal exclusions
Dyno Nobel’s fertiliser manufacturing operations at Phosphate Hill and any financial obligations for the closure and remediation of the company’s Gibson Island and Geelong factories are excluded from the deal.
On completion, Ridley will have access to ongoing supply from Phosphate Hill via an offtake agreement until Dyno has secured a qualified third-party buyer.
Ridley has also sourced a future annual supply of 700,000t of urea from Perdaman Chemicals and Fertilisers’ urea plant in Western Australia’s north-west.
Perdaman is currently building the plant and and expects to start production at the site by 2028.
Fourth growth pillar
Ridley chair Mick McMahon said the acquisition would establish a fourth strategic growth pillar for the company as it evolves into a leading diversified Australian agricultural services provider.
“This has come about following our strong financial performance over recent years and presents a further opportunity to invest in the continued growth of Australian agriculture,” he said.
“The Ridley and Incitec Pivot brands share a rich heritage at the heart of Australian agriculture and the proposed combination will strengthen this for the benefit of our customers, communities, employees and investors.”
Capital raising
Ridley majority shareholder AGR Agricultural Investments, which holds 19.4% equity, has expressed its support for the acquisition and has committed to take up its full entitlement under a $90m offer and $35m institutional placement announced today.
The company will issue approximately 59 million new Ridley shares in total – equivalent to approximately 18.7% of existing ordinary shares – priced at $2.12 each.
Ridley has also received binding commitments for a $300m working capital facility and a new $350m revolving debt facility with ANZ and Westpac to replace the existing $150m facility.
The company plans to use the proceeds from all capital raised and the new debt facilities to fund the acquisition.