Orica (Melbourne) today announced that it has agreed to sell the company’s chemicals business to funds advised by private equity firm Blackstone (New York) for A$750 million ($652 million). The transaction is expected to be completed in the first quarter of 2015. Orica had announced in August that it intends to either demerge or sell the company’s chemicals business. The decision to sell follows a detailed review of both sale and demerger opportunities. Orica’s board of directors formed the view that a sale would likely result in a higher and more certain value for shareholders than a demerger; and other benefits of a sale over a demerger include faster completion, lower transaction costs, and flexibility to consider capital management initiatives, Orica says.
Orica today also announced its financial results for the full fiscal year ended 30 September 2014. The chemicals business reports a 6% fall in full-year sales, compared with the previous fiscal year, to A$1.14 billion, and full-year Ebit for the chemicals business decreased 29%, to A$67.2 million.
The sale of Orica’s chemicals business includes chemicals trading businesses in Australia, New Zealand and Latin America, distribution business Bronson & Jacobs in Australia, New Zealand and Asia and the Australian chlor-alkali manufacturing business. The transaction is subject to Australian Foreign Investment Review Board and New Zealand Overseas Investment Office approval and other customary conditions, Orica says.
Net proceeds from the sale are estimated to be in the range of A$620 million-A$650 million after including estimated transaction and separation costs attributable to the sale.
Orica says it will retain historical environmental liabilities at the production sites that are part of the sale. In July, Orica was convicted and penalized A$768,250 by the Land and Environment Court of the state of New South Wales (NSW) in Australia in relation to charges brought by the Environment Protection Authority (EPA) of NSW for seven pollution incidents at Orica’s facilities at Kooragang Island and Botany, which took place between October 2010 and December 2011.
By Deepti Ramesh