Orica Limited · ASX:ORI
Orica — Merger or Acquisition (February 2020)
47 slides from Orica's merger presentation, Feb 19, 2020
Slide 1: Acquisition of Exsa and Capital Raising
For personal use only Image: Exsa initiating systems facility, shock tube production line ACQUISITION OF EXSA AND CAPITAL RAISING 19 FEBRUARY 2020 NOT FOR DISTRIBUTION OR RELEASE IN THE UNITED STATES
Slide 2: Disclaimer
Disclaimer This presentation has been prepared by Orica Limited (Orica or the Company). This investor presentation (Presentation) is dated 19 February 2020 and has been prepared by Orica Limited (ABN 24 004 145 868) (Orica). By attending an investor presentation or briefing, or accepting, accessing
Slide 3: Disclaimer (cont'd)
Disclaimer (cont’d) Past performance Past performance, including past share price performance of Orica and pro forma financial information given in this Presentation, is given for illustrative purposes only and should not be relied upon as (and is not) an indication of Orica’s views on its future fi
Slide 4: Contents
Contents For personal use only Page 1. Transaction summary 5 2. Exsa acquisition overview 9 3. Growth strategy and outlook 16 4. Capital raising overview 19 5. Looking forward 24 Appendices A. Key risks 26 B. International offer restrictions 38 C. Glossary 43 D. Underwriting agreement summary 45 4 N
Slide 5: Transaction Summary
SECTION 1 TRANSACTION SUMMARY For personal use only 5 NOT FOR DISTRIBUTION OR RELEASE IN THE UNITED STATES
Slide 6: Transaction overview
Transaction overview • Orica (ASX: ORI) has signed an agreement with interests associated with Grupo Breca (Breca) to acquire all of its shares in For personal use only Breca Soluciones de Voladura S.A.C., and its associates’ shares1 in Exsa S.A. (Exsa), together representing 83.5% of the total shar
Slide 7: Strategic acquisition in high growth region
Strategic acquisition in high growth region Exsa currently has the largest share across open pit and underground markets in Peru, predominantly in gold and copper mining with Orica is material movement expected to grow at ~4% pa in Peru1 For personal use only acquiring the #1 Exsa offers a range
Slide 8: Acquisition and capital raising supports Orica's core strategy and growth engines
Acquisition and capital raising supports Orica’s core strategy and growth engines For personal use only • Builds on strong footprint in Latin CORE America • Strengthens Latin America manufacturing footprint 1 CORE 1 • Enhances network capability and synergy realisation opportunities GROWTH Latin 2 A
Slide 9: Exsa Acquisition Overview
SECTION 2 EXSA ACQUISITION OVERVIEW For personal use only 9 NOT FOR DISTRIBUTION OR RELEASE IN THE UNITED STATES
Slide 10: Orica already holds a significant position in the growing Latin American market
Orica already holds a significant position in the growing Latin American market For personal use only Latin America Peru Volume1 (as a % of total Orica) Volume1 AN (as a % of Orica Latin America) EBS AN EBS 18% 17% 34% 29% Revenue1 (as a % of total Orica) Strong technology portfolio for Revenue1 d
Slide 11: Peru is an attractive location, with material movement expected to grow at over 4% CAGR
Peru is an attractive location, with material movement expected to grow at over 4% CAGR For personal use only Overview Total forecast material movement (Copper, Gold, Iron Ore) (2020-2025 million tonnes) • Peru has a wealth of mineral resources, with mining Peru Copper, Iron Ore and Gold material mo
Slide 12: Acquisition of Exsa strengthens Orica's existing footprint in Latin America
Acquisition of Exsa strengthens Orica’s existing footprint in Latin America For personal use only Key highlights Revenue • Exsa is the clear market-leading producer and distributor of (US$m) 16% industrial explosives in Peru, providing technical assistance and 211 support to mining and infrastructur
Slide 13: Exsa's operations are anchored by one of the world's most advanced initiating systems facilities
Exsa’s operations are anchored by one of the world’s most advanced initiating systems facilities For personal use only Overview Overview of Exsa operations • Located in Lurin, Peru, Nazca is a new initiation Export channels Headquarters systems factory and is one of the most modern plants Magazines
Slide 14: Orica plans to use its broader network to utilise latent capacity at the new Lurin facility
Orica plans to use its broader network to utilise the latent capacity at the new Lurin facility and across Peru For personal use only 1 Caps 4 Shock Tube Layout of Exsa’s Nazca facility Full production 55m units pa Full production 145m metres pa Lurin, Peru Current output1 11m units pa Current outpu
Slide 15: Significant synergies available by combining Orica and Exsa's operations
Significant synergies available by combining Orica and Exsa’s operations For personal use only By the third full year of ownership we expect to achieve ~US$18 million run rate synergies, with approximately US$20 million capital expenditure requirement Material manufacturing synergies • Network savin
Slide 16: Growth Strategy and Outlook
SECTION 3 GROWTH STRATEGY AND OUTLOOK For personal use only 16 NOT FOR DISTRIBUTION OR RELEASE IN THE UNITED STATES
Slide 17: Continuously assessing growth opportunities in our core capital and high growth engines
Continuously assessing growth opportunities in our core capital and high growth engines For personal use only OPPORTUNITIES FOR GROWTH RECENT EXAMPLES Mergers and acquisitions supporting existing core markets CORE GROWTH Expansion of existing products into new applications and commodities (Surface a
Slide 18: FY20 guidance
FY20 guidance Following the recent cyclone in Karratha, Western Australia, the Burrup TAN plant start-up has been delayed from the beginning to the end of April 2020. For personal use only All other key assumptions for the 2020 financial year remain unchanged as disclosed on 1 November 2019.1 Higher
Slide 19: Capital Raising Overview
SECTION 4 CAPITAL RAISING OVERVIEW For personal use only 19 NOT FOR DISTRIBUTION OR RELEASE IN THE UNITED STATES
Slide 20: Institutional Placement and Share Purchase Plan
Institutional Placement and Share Purchase Plan For personal use only • Fully underwritten institutional placement to eligible institutional investors to raise approximately A$500 Placement size million and structure • Approximately 23.6 million New Shares to be issued, equivalent to 6.2% of total O
Slide 21: Sources and uses
Sources and uses 1,2 For personal use only Sources A$m Uses A$m Gross proceeds from Placement 500 Acquisition of Exsa 302 Exsa synergy capital requirements 29 Acquisition and capital raising costs 18 Balance sheet flexibility and future 151 growth investment Total sources of funds 500 Total uses of
Slide 22: Pro forma balance sheet
Pro forma balance sheet • Improvement in credit metrics with gearing at the lower end of target range • Capital raising provides greater balance sheet flexibility to support investment in Orica’s For personal use only core capital initiatives and growth engines Orica Exsa Pro forma combined A$m as a
Slide 23: Placement and SPP timetable
Placement and SPP timetable For personal use only Description Date1 7.00pm (Melbourne time), Record date for SPP 18 February 2020 Trading halt and announcement of Acquisition, Placement and SPP 19 February 2020 Placement bookbuild 19 February 2020 Trading halt lifted – trading resumes on the ASX 20
Slide 24: Looking Forward
SECTION 5 LOOKING FORWARD For personal use only 24 NOT FOR DISTRIBUTION OR RELEASE IN THE UNITED STATES
Slide 25: Solid platform in place to deliver superior returns with disciplined approach to growth investment
Solid platform in place to deliver superior returns with disciplined approach to growth investment For personal use only BURRUP Fully operational in FY21 TECHNOLOGY Strong penetration of new technology propositions • [insert] translating to EBIT Continued SAP Full• implementation of ERP system (sing
Slide 26: Appendix A: Key Risks
APPENDIX A KEY RISKS For personal use only 26 NOT FOR DISTRIBUTION OR RELEASE IN THE UNITED STATES
Slide 27: Key risks
Key risks Overview This section discusses some of the key risks associated with any investment in Orica, which may affect the value of Orica shares. The risks set out below are not listed in order of importance and do not constitute an exhaustive list of all risks involved with an investment in Oric
Slide 28: Key risks (cont'd)
Key risks (cont'd) The acquisition of Completion of the acquisition of the Breca Shares (as described on slide 6) is conditional on certain matters: including (a) all the Breca Shares representations and warranties of each of Orica and Exsa are true and accurate on the closing date; (b) Orica has re
Slide 29: Key risks (cont'd)
Key risks (cont'd) Orica may not Voting rights are not attached to investment shares. The rights of shareholders of investments shares in a Peruvian entity acquire 100% of Exsa exclusively relate to the right to receive dividends; maintain their existing proportion of investment shares if there is a
Slide 30: Key risks (cont'd)
Key risks (cont'd) The financial The ability of Orica to achieve its stated objectives will depend on the performance by the parties of their obligations under the capacity of, and agreements for, and related to, the Acquisition. If any party defaults in the performance of their obligations, it may
Slide 31: Key risks (cont'd)
Key risks (cont'd) Risks relating to Orica and its business While the risks set out in this section are stated to relate to Orica and its business, investors should consider that these risks will also apply to Exsa and its business, which Orica will own following completion of the Acquisition. For p
Slide 32: Key risks (cont'd)
Key risks (cont'd) Orica is subject to Orica has incurred in the past, and may incur in the future, fines, penalties and legal and other costs relating to infringements of costs and liabilities environmental laws, regulations and standards. For example, Orica may be found to have liability for the c
Slide 33: Key risks (cont'd)
Key risks (cont'd) Orica’s material Furthermore, there can be no guarantee that key customers will continue to purchase the same or similar quantities of Orica’s supply and products as they have historically. customer contracts For personal use only Also, key customer contracts may be terminated by
Slide 34: Key risks (cont'd)
Key risks (cont'd) Orica’s operations Orica currently supplies into over 100 countries. Management of global operations is extremely complex, particularly given the may be impacted by often substantial differences in the cultural, political and regulatory environments of the countries where Orica op
Slide 35: Key risks (cont'd)
Key risks (cont'd) Orica is exposed to Orica has a number of joint venture partners in different jurisdictions. Each joint venture is subject to various arrangements risks as a result of including certain rights and obligations negotiated with each joint venture partner. Pursuant to such rights and
Slide 36: Key risks (cont'd)
Key risks (cont'd) Orica may be While Orica’s business model is primarily dependent on mining volumes, rather than commodity prices, Orica has exposure to affected by adverse changes in commodity prices through the potential impact on its customers’ operations. Adverse changes in commodity prices ma
Slide 37: Key risks (cont'd)
Key risks (cont'd) General investment risks There are risks There are general risks associated with investments in equity capital such as Orica shares. The trading price of Orica shares may For personal use only associated with an fluctuate with movements in equity capital markets in Australia and i
Slide 38: Appendix B: International Offer Restrictions
APPENDIX B INTERNATIONAL OFFER RESTRICTIONS For personal use only 38 NOT FOR DISTRIBUTION OR RELEASE IN THE UNITED STATES
Slide 39: International offer restrictions
International offer restrictions This document does not constitute an offer of new ordinary shares (New Shares) of Orica Limited (the Company) in any jurisdiction in which it would be unlawful. In particular, this document may not be distributed to any person, and the New Shares may not be offered o
Slide 40: International offer restrictions (cont'd)
International offer restrictions (cont'd) Certain Canadian income tax considerations. Prospective purchasers of the New Shares should consult their own tax adviser with respect to any taxes payable in connection with the acquisition, holding or disposition of the New Shares as any discussion of taxa
Slide 41: International offer restrictions (cont'd)
International offer restrictions (cont'd) Norway This document has not been approved by, or registered with, any Norwegian securities regulator under the Norwegian Securities Trading Act of 29 June 2007. Accordingly, this document shall not be deemed to constitute an offer to the public in Norway wi
Slide 42: International offer restrictions (cont'd)
International offer restrictions (cont'd) United Kingdom Neither this document nor any other document relating to the offer has been delivered for approval to the Financial Conduct Authority in the United Kingdom and no prospectus (within the meaning of section 85 of the Financial Services and Marke
Slide 43: Appendix C: Glossary
APPENDIX C GLOSSARY For personal use only 43 NOT FOR DISTRIBUTION OR RELEASE IN THE UNITED STATES
Slide 44: Glossary of terms
Glossary of terms For personal use only A$ Australian dollar IT Information technology AN Ammonium nitrate Lead Manager / Goldman Sachs Australia Pty Ltd ANE Ammonium nitrate emulsion Underwriter ANFO Ammonium nitrate fuel oil Nazca Initiating Systems manufacturing facility at Lurin, Peru ASX Austra
Slide 45: Appendix D: Underwriting Agreement Summary
APPENDIX D UNDERWRITING AGREEMENT For personal use only SUMMARY 45 NOT FOR DISTRIBUTION OR RELEASE IN THE UNITED STATES
Slide 46: Underwriting agreement summary
Underwriting agreement summary Goldman Sachs Australia Pty Ltd (Lead Manager) is acting as sole lead manager, bookrunner and underwriter of the Placement. Orica has entered into an underwriting agreement with the Lead Manager in respect of the Placement (Underwriting Agreement). For personal use onl
Slide 47: Underwriting agreement summary (cont'd)
Underwriting agreement summary (cont'd) e) Orica withdraws the Placement and the SPP or indicates that it does not intend to or is unable to proceed with the Placement; there is an application to a Government Agency (including the Takeovers Panel but excluding ASIC) for an order, declaration (includ