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Highlights:
- Provider of sodium cyanide for gold extraction, Orica has announced strategic acquisition of Axis Mining in a AU$350 million deal.
- To fund the acquisition, Orica would conduct an institutional placement of AU$650 million.
- Orica has not changed its earning guidance for financial year 2022.
- By October 2022, the company expects to complete the transaction, subject to certain conditions.
Commercial explosives provider, Orica Limited (ASX:ORI) on Wednesday shared that it has inked a binding agreement to acquire Axis Mining Technology. Orica said that Axis is a leader in designing, developing and manufacturing geospatial instruments and tools for the mining industry.
Shares of Orica were placed on a trading halt today (3 August 2022) before the market opened amid the pending announcement. The shares will commence normal trading tomorrow (4 August 2022).
Orica shares last traded at AU$17.20 per share on the ASX.
Acquiring Axis Mining Technology
Supplier of ground support in tunnelling and mining said it would pay upfront cash of AU$260 million along with an additional deferred earn-out payment of a maximum of AU$90 million. This earn-out payment is dependent upon the cumulative EBITDA generated by the company from 1 October to 31 December 2022.
The earn-out payment will be made after the completion of the period, which is 31 December 2024.
Orica expects to close the transaction by October this year.
The strategic rationale behind purchasing Axis
Image source: © Gajus | Megapixl.com
As per Orica’s release, Axis is a valuable addition to its digital solution platform. The acquisition would position the company to become an end-to-end, integrated, mine to mill solutions provider.
To ensure smooth integration of Axis and Orica businesses, the management team of Axis would sign new employment agreements with Orica.
Sanjeev Gandhi, CEO and managing director, Orica, said that this transaction would expand the Orebody Intelligence portfolio upstream and strengthen the digital solutions verticals.
To facilitate the transaction, the company has announced an equity raise.
Details of the equity raise
Orica has announced a fully underwritten institutional placement of AU$650 million to fund the transaction. In addition to this, the company would conduct a non-underwritten share purchase plan for the Australian and New Zealand shareholders with an aggregate cap of AU$75 million.
The placement price will be AU$16.00 per share, representing a discount of 7% on the last traded price of Orica. Under the placement, around 40.6 million new shares will be issued, which is circa 9.9% of the existing issued capital.
The company would employ the extra proceeds from the equity raise for fulfilling the trade working capital requirements. The funds will assist Orica in responding to the changing external operating environment.
Orica’s earnings outlook for FY22
Orica informed the market through today's release that its earnings guidance for the financial year 2022 (FY22) remains unchanged. The company expects to deliver strong financial performance in the second half of 2022. Despite supply chain disruptions and termination of operations in Russia, the company expects to maintain the earning momentum from its core business.
For FY23, Orica said it would witness inflationary pressure, supply chain dislocations and higher energy costs.
