ASX 200 stock tumbles as $1 billion deal goes south

Investors are bidding down the ASX 200 stock despite a pending $900 million share buyback.

| More on:
a farmer kneels on one leg and closely examines soil from his farm against a blue sky backdrop.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

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.

Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Industrials Shares

A smiling businessman in the city looks at his phone and punches the air in celebration of good news.
Industrials Shares

Bell Potter names the best ASX industrials shares to buy in FY25 (for big returns)

Here's what the broker is saying about these stocks.

Read more »

defence personnel operating and discussing defence technology
Industrials Shares

Move over DroneShield: This ASX defence stock is up 67% in a month!

With massive growth in recent months, could this stock be the next DroneShield?

Read more »

Two men in business attire play chess.
Industrials Shares

ASX industrial stock rallying amid $110 million acquisition with 'valuable efficiencies'

This waste management company is expanding its presence in Melbourne.

Read more »

A man holding a packaging box with a recycle symbol on it gives the thumbs up.
Industrials Shares

This ASX growth stock just leapt 6% on international expansion plans

The ASX growth stock is shrugging off the broader market malaise on Monday.

Read more »

a bricklayer peers over the top of a brick wall he is laying with a level measuring tool on top and looks critically at the work he is carrying out.
Dividend Investing

Down 17% in 3 months, is it time to buy this ASX 200 dividend superstar?

Brickworks shares are trading at an attractive valuation, according to experts.

Read more »

Man in business suit crouched and freezing in a block of ice.
Industrials Shares

APM share price grinds to a halt as investors await update on takeover offer

The international employment services company says it will update shareholders on the MDP takeover offer shortly.

Read more »

A man in a business suit wearing boxing gloves slumps in the corner of a boxing ring representing the beaten-up Zip share price in recent times
Industrials Shares

Beaten-up ASX 200 stock surges 12% on buyout rumour

This ASX 200 building materials stock has been struggling throughout FY24.

Read more »

Two colleagues at work looking at a tablet and smiling at a rising share price.
Industrials Shares

Why is this ASX 200 stock surging despite a $500 million writedown?

Investors are looking beyond this write-down and focusing on its strong underlying performance.

Read more »