Orica Cash Offer of $5.50 for Incitec Minorities

11th December, 1998

Orica Limited today announced that its wholly owned subsidiary, Orica Investments Pty Limited ("Orica"), is making a cash offer of $5.50 per share for all the ordinary shares in Incitec Ltd. ("Incitec") it does not already own. The offer values Incitec at approximately $659 million. Incitec shareholders will be entitled to receive the final dividend of 9 cents per share declared on 22 October 1998.

The offer price represents:

• 23% premium to the closing price of Incitec shares one week ago before takeover speculation caused a 10% increase in Incitec’s share price;
• 18% premium over the weighted average price for Incitec shares over the last month; and
• 22% premium over the weighted average price for Incitec shares over the last three months.

Orica currently holds a controlling shareholding of 87,896,145 ordinary shares in Incitec representing approximately 73.3% of the company’s total issued capital. The Offer is a cash offer, free from brokerage and stamp duty, and is conditional upon:

Orica becoming entitled to at least 90% of the issued capital of Incitec and satisfying other conditions to enable compulsory acquisition of the outstanding shares;

• no prescribed occurrence (as defined in the corporations Law) in relation to Incitec occurring between the date of the Part A Statement and the end of the offer period;
• no material adverse change in Incitec’s structure, business, financial or trading position or profitability between the date of the Part A Statement and the end of the offer period; and
• the ASX All Ordinaries Index not, at any time between the date of the Part A Statement and the end of the offer period, falling below 90% of its current level.

Commenting on the announcement, Philip Weickhardt, managing director and chief executive officer of Orica Limited, said:

"Orica’s stated strategy is to focus on four core business platforms of agricultural chemicals, mining services, chemicals and consumer products. Moving from 73% to 100% ownership is entirely consistent with that strategy. It confirms our commitment to the important fertilizer and Crop Care businesses, and allows us to more closely align Incitec’s ammonium nitrate and chemicals businesses to our core mining services and chemicals platforms.

"The working relationship between Orica and Incitec has been excellent and it would be acceptable to Orica if the current ownership structure were to continue. However, the structure is historical and moving to full ownership is a better way forward.

"The acquisition of the Incitec minorities will streamline the Orica Group’s decision making and operating structures and therefore enhance the Group’s ability to deal with the increasing competitive pressures experienced in Incitec’s and Orica’s key markets. The acquisition will also enable the strategic development of Incitec’s businesses to be fully aligned with Orica’s other operations.

"In our view the offer of $5.50 cash is a full and fair price for the Incitec minorities. It represents a generous premium to the pre-offer price, particularly taking into account the fact that Orica already has control of Incitec with 73% of the company’s issued capital."

In the news release for yesterday’s Incitec Annual General Meeting, managing director Greg Witcombe, while forecasting that demand is expected to be firm in the year ahead, conceded that depressed international urea prices would restrict profit improvement and that this was likely to be a major influence throughout the year.

Mr Weickhardt further commented, "At a cost of $176 million for the Incitec minorities, Orica’s gearing will remain below 40%. We expect that this will not restrict Orica’s ability to continue to make value-adding acquisitions as and when they arise.

"The acquisiton of the minorities is expected to be EPS positive to Orica in 1999."

The Part A Statement is expected to be lodged with the ASIC later today with offers expected to be despatched to Incitec shareholders late December. Under the Corporations Law, Incitec will be required to commission an Independent Expert’s Report for inclusion in its Part B response.

Orica Limited is being advised in this transaction by Warburg Dillon Read and Arthur Robinson & Hedderwicks.