March 17, 2008

Volume 86, Number 11

p. 10

Nitrogen Initiative

Incitec Pivot To Buy Dyno Nobel

Merger worth $3.1 billion brings together fertilizers and explosives

Marc Reisch

AUSTRALIA-BASED fertilizer maker Incitec Pivot has reached an agreement to buy Dyno Nobel, the world's second-largest explosives maker, for $3.1 billion.

The two firms are a "natural fit," says Incitec CEO Julian Segal, because "both businesses have nitrogen-based manufacturing at their core." With expanded annual sales of more than $3 billion, Incitec will be well positioned to take advantage of a profound increase in global demand for fertilizer and explosives, Segal says.

Over the past few years, industrialization in China and India has helped drive up demand for food and mined raw materials such as coal and metal, creating what Segal calls a "supercycle" of higher prices for commodities. This cycle could last 15 more years, analysts say, and along with it, increase demand for fertilizers and mining explosives.

"The timing for bringing together these two companies is ideal," Segal told journalists in a conference call. The amalgamation of Dyno's explosives operations, primarily in North America and Australia, with Incitec's Australian fertilizer operations will give Incitec the ability to shift production between fertilizers and explosives, he said. Ammonium nitrate can be used as a fertilizer or an explosive.

Incitec has been stalking Dyno since last year when it acquired a 13% "strategic stake" in the explosives company and said it would pursue "further opportunities" with Dyno's board. Incitec has secured a $2.2 billion line of credit from a consortium of banks to finance the purchase. After the deal is consummated, Dyno shareholders will own 17% of the enlarged firm.

Ironically, the merger will pit Incitec against its former parent, Orica, the world's largest explosives maker. Orica completed the sale of the fertilizer firm in July 2006.

Orica also has a connection to Dyno Nobel, the onetime Norway-based explosives manufacturer that traces its roots back to Alfred Nobel, the discoverer of dynamite and father of the Nobel Prize. In 2005, Orica and Australia's Macquarie Bank bought Dyno from the Nordic private equity firm Industri Kapital. The following year, Orica took Dyno's assets in Latin America, Asia, Europe, the Middle East, and Africa and sold the rest of the company to Australian shareholders in an initial public offering.

Chemical & Engineering News

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