Ridley has entered into a binding arrangement to acquire 100 per cent of the Incitec Pivot Fertiliser distribution business from Dyno Nobel for A$300 million. 

The acquisition value is stated on a cash-free, debt-free basis and is reflective of an average level of working capital.

Excluded from the acquisition are Dyno Nobel’s fertiliser manufacturing operations at Phosphate Hill and the obligations for the closure and remediation of the Gibson Island and Geelong properties. 

These are all to remain with Dyno Nobel.

While Ridley is not acquiring Dyno Nobel’s contract with Perdaman in relation to the supply of 2.2 million tonnes per annum of urea, it has secured contracted supply from the holder of this contract (Dyno Nobel or other) of at least 700k tonnes per year from the Perdaman urea plant post-commissioning (expected by 2028) on favourable terms relative to its current supply arrangements.

Ridley managing director and chief executive Quinton Hildebrand says concurrently, Ridley has agreed to a lease for the Geelong North Shore property and put-call options under which it will acquire the entire property for $75 million at the later of two years from completion, or the completion of the closure of manufacturing operations and associated remediation activities on this site by Dyno Nobel.

Quinton says the cost of this option is expected to be offset by the land valuation of the property, which will provide a range of commercial options for Ridley.

The acquisition is subject to limited conditions, including:

• The completion of the required Dyno Nobel internal restructuring of the IPF Distribution business assets into entities to be acquired by Ridley to effect the acquisition.

• Entry into an offtake agreement in relation to urea supply from Perdaman (expected to commence by 2028 post-commissioning).

• No material adverse change to IPF Distribution between signing and completion.

• The transfer to Dyno Nobel of the Geelong freehold properties, together with a nominal leaseback and the entry into the put and call options.

• Completion expected by third quarter 2025 and no later than 30 November 2025, subject to satisfaction of the conditions precedent.

Ridley chairman Mick McMahon says the proposed acquisition represents a unique opportunity to add Australia’s number one distributor of fertilisers to Ridley’s market-leading positions in the provision of animal nutrition products and services.

“The opportunity arises following Ridley’s strong financial performance over recent years and represents a further opportunity to invest in the continued growth of Australian agriculture,” Mick adds.

“The Ridley and Incitec Pivot brands and distribution networks share a rich heritage at the heart of Australian agriculture and our regional communities, and the proposed combination will only strengthen this for the benefit of our customers, communities, employees and investors.”

Quinton agreed, saying “this strategic acquisition positions Ridley as a leading diversified Australian agricultural services business and establishes a fourth pillar for growth.”

“We see significant opportunity for the Incitec Pivot business by bringing focus, investment and leveraging complementary capabilities across the combined entity,” he says.

Overview of IPF Distribution:

IPF Distribution is Australia’s number one distributor of fertilisers with about 46 per cent of the east coast market, distributing 2.2 million tonnes of product for the 12 months to September 30 last year.

The competitive advantage of IPF Distribution is derived by:

Leading industry scale with 46 per cent East Coast market share: IPF Distribution is estimated to have 2.4 times the market share and 1.6 times the distribution centre volume of its nearest competitor. This scale provides advantages along the supply chain, improving its offering to customers.

Strategically located distribution footprint: IPF Distribution has a network of 13 primary distribution centres strategically located in key customer catchments with access to critical import infrastructure. These are supported by seven regional service centres and three Easy Liquid distribution sites.

Diversified product range, geographic and end market exposure: IPF Distribution supplies a diverse range of products such as urea, MAP/DAP, Granulock and industry-leading blends to a range of industries across the east coast of Australia. There is no reliance on a single state nor end market, with volumes balanced across Victoria (36 per cent), Queensland (25 per cent), South Australia (17 per cent) and NSW (16 per cent).

Focus on value-added products and service offerings: IPF Distribution offers customers innovative and exclusive products for a variety of solutions. This is supplemented by its Nutrient Advantage and Precision Ag service offerings, with Nutrient Advantage providing continuous nutritional analytical services for farmers for over 60 years.

Established supply chain providing security of supply: IPF Distribution has strong trading and in-port capabilities which are supported by deep and long-standing relationships with key suppliers globally.

Highly strategic access to urea supply from Perdaman by 2028: The Perdaman urea plant, which is being constructed in northwest WA by Perdaman Chemicals and Fertilisers, is due for commissioning by 2028. Supply from this facility carries a number of strategic benefits, including a shorter shipping voyage. Ridley has secured contracted supply of at least 700k tonnes per annum on favourable terms relative to its current sourcing.

Industry-leading capability: IPF Distribution is supported by a well-resourced and experienced team with industry-leading capabilities. For the FY24 period, total volumes distributed were 2.2 million tonnes and the business generated EBITDA of $86 million.

Strategic rationale
The acquisition of IPF Distribution delivers a number of strategic benefits, including:

Complementary distribution footprint with shared competencies and customers: Strong fit with Ridley core competencies across commodity risk management and logistics whilst building on key relationships with existing customers.

Establishes a new growth pillar with scale and the market-leading position: Enhances Ridley’s position as one of Australia’s leading diversified agricultural services companies with scale and leading market positions across each of its verticals.

Broadens and further diversifies the Ridley portfolio: IPF products serve a broad range of use cases, complementing Ridley’s existing offering.

Transformational opportunity to enhance IPF Distribution’s market position with focus and investment: Post separation from Dyno Nobel, an opportunity to bring further focus without the distraction of a long-standing divestment process.

Compelling financial returns

Quinton says synergies estimated at $7 million per annum, primarily from the consolidation of back office and support costs, are expected to be realised over a two-year period.

He says the acquisition value implies 5 times the FY24 EBITDA, inclusive of run-rate synergies of $7 million and after deducting the earnings contribution of ongoing supply from Phosphate Hill, which could potentially close on the completion of Dyno Nobel’s strategic review.

“The acquisition is expected to be 25 per cent plus EPS accretive in FY26 on a pro-forma basis, reflecting a 12-month earnings contribution, inclusive of run-rate synergies and exclusive of the earnings impact of ongoing supply from Phosphate Hill (potential to close on completion of Dyno Nobel strategic review, not earlier than September 2026, adjusted to include distributions payable under the vendor notes,” Quinton says.

Outlook

“Ridley’s outlook is unchanged since the most recent market update,” he adds.

“As noted in our announcement to the market on April 16, trading conditions for Ridley are being impacted by lower selling prices in the ingredient recovery business, particularly with avian influenza-related export market restrictions on poultry meals and oils, and a one-off impact of lower packaged product sales volume related to the recent weather events in Queensland.”