S&P/ASX 200 Index (ASX: XJO) stock Incitec Pivot Ltd (ASX: IPL) is taking a tumble today.
Shares in the company – which manufactures explosives, chemicals and fertilisers – closed yesterday trading for $2.90. In morning trade on Wednesday, shares are swapping hands for $2.79 apiece, down 3.8%.
For some context, the ASX 200 is down 0.6% at this same time.
Here's what's happening.
Why is the ASX 200 stock under pressure?
The Incitec Pivot share price is sliding after the company announced it had ended negotiations with PT Pupuk Kalimantan Timur for the sale of its fertilisers business, Incitec Pivot Fertilisers, a deal estimated to be valued at over $1 billion.
The ASX 200 stock highlighted the advanced stage of these negotiations in its half-year results, released on 16 May.
At the time, CEO Mauro Neves said:
We are in advanced negotiations for a potential sale of our fertilisers business to PT Pupuk Kalimantan Timur, who are a major fertilisers producer in Asia and current supplier of urea to Australia…
With negotiations for the sale of IPF not yet concluded, our on-market share buyback of up to $900 million remains on hold.
Today Incitec Pivot said that after carefully considering how to maximise shareholder value while balancing the risks of completing the sale within a reasonable timeframe, management had opted to pull the plug.
On the plus side, with the sale off the table, the ASX 200 stock will now commence its suspended on-market share buyback program of up to $900 million. Management said the company will prioritise the buyback for the benefit of its shareholders.
Incitec Pivot will continue to manage its Dyno Nobel and Incitec Pivot Fertilisers businesses separately.
Commenting on the ceased sale negotiations, Neves said:
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 buyback of up to $900 million. 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.
Neves said the ASX 200 stock will continue to assess options "for the structural separation of the two businesses", while the immediate focus will be the share buyback program.
As for Dyno Nobel and Incitec Pivot Fertilisers, Neves added:
Led by a talented global executive leadership team, our Dyno Nobel business is being transformed into a global operation which is expected to substantially improve its financial performance.
Our IPF business remains focused on value accretive market share growth and is in a strong position for the agricultural season ahead.
Incitec Pivot reconfirmed the FY 2024 earnings guidance reported in its half-year results for its Dyno Nobel and IPF businesses.
