Own Incitec Pivot shares? Here's what you need to know about the proposed demerger

What the pivot could mean for shareholders…

| More on:
A man sits uncomfortably at his laptop computer in an outdoor location at a table with trees in the background as he clutches the back of his neck with a wincing look on his face.

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

Key points

  • Incitec Pivot shares are trading down 1.67% to $3.54 apiece on Tuesday morning
  • Investors are still applying selling pressure after the company announced plans to break up its fertiliser and explosives segments
  • Analysts have shared doubts over the value in the deal considering the associated costs

While shareholders were licking their lips amid a record half-year result from Incitec Pivot Ltd (ASX: IPL) yesterday, another snippet of news derailed the euphoria. Plans to split the company into two left Incitec Pivot shares down 3.7%.

Unfortunately, the pain is continuing today with the fertiliser and explosives manufacturer weakening a further 1.67% this morning. This places the company's share price approximately 15% below the 52-week high that it reached last month.

What does the split mean for Incitec Pivot shares?

The united explosive and fertiliser business has operated for 14 years under the Incitec Pivot banner. The Australian fertiliser maker acquired Dyno Nobel back in 2008, yet the combined company has never seen the same heights in its share price since.

Fast forward to the present, Incitec's plan is to break up the two segments of the business and list them individually on the ASX.

This would see the currently-listed entity become known as Dyno Nobel Limited — a global leader in industrial and mining explosives manufacturing. Meanwhile, the company's fertiliser division would list separately on the ASX as Incitec Pivot Fertilisers Limited.

After undergoing a strategic review, the company concluded the demerger would be beneficial for several reasons. The rationale included: a declining synergy in ammonia manufacturing; an improved focus on technology specific to the industry; and, a potential re-rating for shares in Incitec Pivot and Dyno Nobel from investors.

If approved, shareholders will receive a proportional holding of both companies as per their existing holding. The company is targeting separation completion of the two businesses in the first half of 2023.

What do analysts think of the proposal?

The proposal to split up Incitec Pivot was also not received well by analysts. The teams at Citi and Jefferies have both reduced their price targets on Incitec Pivot shares following the latest announcement.

According to Citi, it is unclear whether splitting into two companies will deliver more value than the cost of doing so. At a one-off separation cost of $80 million to $105 million and ongoing costs of $25 million to $35 million each year, Citi is not confident in the value proposition of the separation.

The two brokers cut their price target on Incitec Pivot shares to $3.70, representing a paltry ~4% upside.

Should you invest $1,000 in Bitcoin.ℏ right now?

Before you buy Bitcoin.ℏ shares, consider this:

Motley Fool investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now... and Bitcoin.ℏ wasn't one of them.

The online investing service he’s run for over a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

And right now, Scott thinks there are 5 stocks that may be better buys...

See The 5 Stocks *Returns as of 30 April 2025

Motley Fool contributor Mitchell Lawler 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 Mergers & Acquisitions

A graphic showing three hands holding red paddles with the word BID, indicating a bidding war for an ASX share company
Mergers & Acquisitions

Guess which ASX All Ords stock just received a new takeover offer

Let's see which stock is in the crosshairs of a rival.

Read more »

Man with rocket wings which have flames coming out of them.
Technology Shares

Guess which ASX All Ords stock is rocketing 34% on takeover deal

This stock looks set to leave the ASX boards in the near future after accepting a takeover deal.

Read more »

Two miners standing together.
Gold

Northern Star Resources set to buyout rival De Grey mining

As gold soars, ASX miners continue to mine the acquisition pipeline.

Read more »

Man with rocket wings which have flames coming out of them.
Mergers & Acquisitions

Guess which ASX 300 stock is rocketing 15% on big takeover offer

Not every share is being dragged lower on Monday.

Read more »

Happy woman holding white house model in hand and pointing to it with a pen.
Mergers & Acquisitions

Up 70% this year, Domain share price wobbles on CoStar takeover update

Domain released an update on CoStar’s $2.8 billion takeover bid.

Read more »

Man with rocket wings which have flames coming out of them.
Mergers & Acquisitions

Guess which ASX stock is up 100%+ on takeover deal

This share is catching the eye on Thursday. Let's see what is happening.

Read more »

Frustrated stock trader screaming while looking at mobile phone, symbolising a falling share price.
Mergers & Acquisitions

James Hardie shares crash 11% amid $14b AZEK acquisition

The market doesn't appear keen on this deal. Let's see what it offers.

Read more »

Workers inspecting a gas pipeline.
Mergers & Acquisitions

Here's why the Cleanaway share price rocketed 8% today

Cleanaway shares surged on some big news this morning.

Read more »