Ridley Corp snares Australia’s largest fertiliser distributor from Dyno Nobel in $375m deal

Agricultural services group Ridley Corporation (ASX: RIC) is acquiring Australia’s largest fertiliser supplier from Dyno Nobel (ASX: DNL) in a deal that could be worth up to $375 million.

Ridley, which is planning a $125 million equity raising to help fund the buyout, is acquiring Dyno Nobel’s IPF Distribution subsidiary for $300 million and has an option to buy the company’s Geelong North Shore manufacturing and distribution centre for $75 million.

The move is another step towards Dyno Nobel’s exit from the fertiliser sector after the company, formerly known as Incitec Pivot, announced last year plans to close down its Geelong fertiliser facility to focus solely on the explosives market.

The acquisition of the Geelong property does not alter plans to close the North Shore manufacturing operation which Dyno Nobel is aiming to finalise by December this year.

Ridley Corp says that Dyno Nobel’s Phosphate Hill fertiliser manufacturing and the closure and remediation costs associated with the Gibson Island and Geelong manufacturing operations are excluded from the acquisition.

“The proposed acquisition represents a unique opportunity to add Australia’s number one distributor of fertilisers to Ridley’s market leading positions in the provision of animal nutrition products and services,” says Ridley chairman Mick McMahon.

“The opportunity arises following Ridley’s strong financial performance over recent years and represents a further opportunity to invest in the continued growth of Australian agriculture."

“The Ridley and Incitec Pivot brands and distribution networks share a rich heritage at the heart of Australian agriculture and our regional communities, and the proposed combination will only strengthen this for the benefit of our customers, communities, employees and investors.”

IPF Distribution is Australia’s largest distributor of fertilisers with about 46 per cent market share on the east coast, distributing about 2.2 million tonnes of product nationally in the 12 months to 30 September 2024.

The acquisition has been struck at a valuation of five times FY24 EBITDA, including expected synergies of $7 million over the next two years.

"This strategic acquisition positions Ridley as a leading diversified Australian agricultural services business and establishes a fourth pillar for growth,” says Ridley CEO Quinton Hildebrand.

“We see significant opportunity for the Incitec Pivot business by bringing focus, investment and leveraging complementary capabilities across the combined entity.”

While Ridley plans to lease the Geelong North Shore property from Dyno Nobel following the transaction, the company has secured an option to acquire the site for $75 million within two years of the deal settling.

The company says the cost of the option will be “offset by the land valuation of the property, which will provide a range of commercial options for Ridley”.

The acquisition is being funded via existing debt facilities and a $125 million equity raising, comprising a $90 million entitlement offer and a $35 million fully underwritten institutional placement.