Why is ASX chemicals company Incitec Pivot Ltd (ASX: IPL) up over 6%?

March 21, 2023 12:25 PM AEDT | By Priyabrata Prusty
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  • Incitec Pivot Ltd. shares surged as much as 6.7% in opening trade to an intraday high of AU$3.330.
  • On Monday, 20 March 2023, post market hours, the company announced entering into an agreement to sell its ammonia production facility in Waggaman.
  • Incitec Pivot Ltd has signed a 25-year ammonia supply agreement as part of the deal.

Shares of Australian multinational chemicals company Incitec Pivot Ltd (ASX: IPL) surged as much as 6.7% in opening trade, outperforming the broader S&P/ASX 200 index, which was up 1.12%. As of 11:15 am, AEDT, IPL shares were up 3% at AU$3.220 after the company announced entering into an agreement with CF Industries Holdings, Inc. (NYSE: CF) for the sale of its ammonia production facility located in Waggaman, Louisiana, for a total consideration of US$1.675 billion or AU$2.50 billion.

The announcement made post-market hours on Monday, said that as part of the deal, Incitec Pivot Ltd has signed a 25-year ammonia supply agreement with CF to supply up to 200k short tonnes of ammonia per annum to its Dyno Nobel Americas (DNA) explosives business. Also, this ammonia supply will be done at producer cost for DNA. The value assigned to this supply agreement is nearly US$425 million or AU$634 million, which will be deducted from the total amount to be paid to IPL for the sale of Waggaman.

Financial details of the transaction 

IPL will realise a value of AU$1,884 million for Waggaman divestment after deducting a tax component of AU$616 million from the gross proceeds of AU$2.5 billion. The value assigned to the long-term ammonia offtake agreement is AU$634 million. So, the net cash proceeds that IPL will receive from the proposed deal will be AU$1,249 million.

The company intends to allocate the cash proceeds from the proposed deal in line with its capital allocation framework.

Commenting on the deal, IPL's managing director and CEO, Jenne Johns said:


The proposed deal is subject to US anti-trust regulatory clearance and the completion of other customary closing conditions. 


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