ICI Australia/Orica Takes on the World in Explosives

23rd December, 1997

ICI Australia Limited today announced it has reached a definitive agreement to acquire Imperial Chemical Industries PLC's explosives activities in the Americas and Europe for US$370m (A$570m).

The sale comprises ICI PLC's explosives operations in Canada, Latin America, Europe, and its distribution business in the United States, which have estimated 1997 sales of approximately US$500 million (A$770m), trading profit of approximately US$20 million (A$31m), and net assets to be acquired of approximately US$295 million (A$455m). This acquisition is the culmination of a competitive auction process.

ICI Australia became an independent company earlier this year when ICI PLC's 62.4% shareholding was sold in a global share offer. The Company name will become Orica Limited from 2 February, 1998.

The businesses have leading market shares with number one or number two positions in the key markets of Canada, U.S.A., Brazil, Mexico, Chile and U.K. and important customer relationships with major international mining houses. After the acquisition ICI Australia/Orica will be the world's largest supplier of explosives and have a global market share of approximately 20%. In the Americas, which is the biggest and most competitive market in the world, ICI Australia will be the largest explosive supplier. Latin America represents the world's fastest growth market for explosives.

The businesses to be acquired comprise an integrated product portfolio covering the full range of explosives requirements, including ammonium nitrate supply and manufacture, packaged and bulk explosives, initiating systems and blast management services. ICI Australia/Orica after the acquisition will have total sales from explosives of approximately A$1.3 billion, and overall sales of approximately A$4.3 billion.

The international headquarters of ICI Explosives is in Toronto, Canada. The business to be acquired operates in 12 countries with its main manufacturing sites in Canada, Mexico, U.S.A., Brazil and the United Kingdom.

ICI Australia is already a world leader in its own right in bulk explosives. It operates the most successful explosives business world-wide and is the most advanced in pushing down the value chain with blast management and other services. It is therefore well placed to be a global player in this business.

This is one of the few opportunities for an Australian company to be the global leader in a chemicals business where Australian technology and know-how is leading edge - where Australia has world leading customers who demand the best technology.

Philip Weickhardt, managing director and CEO of ICI Australia said "I am delighted that we are able to reunite the Americas, European and Asian Pacific ICI Explosives businesses, recreating the global leader in the explosives industry. This acquisition is absolutely consistent with our desire to grow the already strong mining services portfolio of ICI Australia. ICI Australia will look forward to developing future alliances, joint ventures and business operations in India, Africa and other world growth markets".

"There are exciting prospects for the reunited business and its employees" said Mr Weickhardt. "The investment provides an attractive business and geographical base for future growth of the Orica organisation" Mr Weickhardt said. "We will now move to a position where approximately one quarter of our sales will be derived offshore. There are strong synergies between the acquired business and our existing explosives business which will lead to improved profitability and growth. We see ourselves as very much the natural owner of this global business given our track record and leading position in the Australian market which is the world's most sophisticated bulk explosives and blast management services market. Given the globalisation of our customer base and also the international position of some of our competitors it is important that we look and think globally".

Much of the funding for the acquisition will come from the previously announced sale of the ICI Australia Pharmaceuticals business to Zeneca and the likely sale of the Moomba to Botany ethane pipeline. Borrowings to fund this acquisition from existing credit lines will be largely in US$ and Canadian$ which will be naturally hedged against assets being acquired.

The acquisition is expected to be mildly earnings dilutive during 1998, essentially earnings neutral during 1999, and earnings positive thereafter. ICI PLC has already carried out very substantial restructuring leading to significantly improved profitability in 1997. Further restructuring, investment and cost reduction is both necessary and possible to deliver the profitability potential of these businesses.

Former ICI Australia executive director, Peter Clinch, who has been managing the world-wide explosive businesses of ICI PLC, has agreed to lead the Orica International Explosives business. It is intended that he will become an Executive Director of Orica Limited once the acquisition is completed early in 1998.

The key managers responsible for the Latin American, U.S.A., and Canadian businesses have also indicated their intention to join the Orica organisation. Approximately 2,700 employees will transfer with the business to Orica.