Incitec Pivot Ltd (ASX: IPL) shares are having a strong finish to the week.
In morning trade, the ASX 200 agricultural and industrial chemicals company's shares are up 5% to $2.91.
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Why is this ASX 200 share charging higher?
The catalyst for this strong gain has been news that Incitec Pivot is returning $500 million to shareholders.
This return follows the sale of the Waggaman ammonia manufacturing facility in Louisiana to CF Industries Holdings Inc (NYSE: CF) at the end of last year.
According to the release, the ASX 200 share intends to return the $500 million via two methods.
The first is a $0.1557 per share equal capital reduction, which equates to a total of approximately $302 million in aggregate.
The second is an unfranked special dividend of $0.1017 per share, which totals approximately $198 million.
Combined, this equates to a 25.74 cents per share return, which is the equivalent of an 8.8% return at current prices.
What's next?
The company advised that it expects the Australian Taxation Office (ATO) to issue a Class Ruling following completion of the capital reduction and payment of the dividend.
It expects no part of the capital reduction should be treated as a dividend for Australian taxation purposes. Instead, subject to the ATO's Class Ruling, the ASX 200 share expects that for shareholders who hold their shares on capital account for Australian income tax purposes, the cost base of each share will be reduced by $0.1557 per share for the purposes of calculating any capital gain or loss on the ultimate disposal of that share for Australian income tax purposes.
An immediate capital gain would arise for shareholders where their cost base of any share is less than $0.1557.
The Incitec Pivot Board also advised that it is satisfied that the capital reduction is fair and reasonable to shareholders as a whole and does not materially prejudice its ability to pay its creditors.
