Orica Moves To Assist Fertiliser Merger
14th October, 2002
Orica today announced steps to assist the proposed merger of Incitec’s fertiliser business with Pivot and provide more choices for Incitec shareholders if Incitec shareholders approve the demerger of the Industrial Chemicals business.
Orica Managing Director and CEO, Malcolm Broomhead, said that:
- The condition that Orica’s full acquisition of Incitec’s industrial chemicals business, Industrial Chemicals Limited (ICL), by means of the minority buy out offer, must occur before the Incitec/Pivot merger had been waived; and
- If Futuris rejects the proposed minority buy-out offer, Incitec shareholders (who will receive shares in ICL on its demerger from Incitec) will receive a subsequent unconditional cash offer for their ICL shares at the same price as the proposed minority buy out offer.
Mr. Broomhead said that it was critical for the Incitec demerger to occur to give Incitec shareholders the opportunity to participate in the benefits of Incitec’s proposed merger with Pivot and to realise the value of their investment in Incitec Industrial Chemicals.
"Subject to shareholder and regulatory approvals and other conditions, the fertiliser merger will provide low-risk controllable value creation to all shareholders in the proposed Incitec Pivot Ltd," he said.
"The efficiency gains by merging the two fertiliser businesses are estimated to be more than $30 million a year.
However, the demerger is the critical first step in the process. If the demerger is not approved, neither the minority buy out offer (or, if this is opposed by Futuris, the cash offer) for ICL shares nor the merger with Pivot can proceed."
"The fertiliser merger with Pivot can’t occur without the removal of Incitec’s industrial chemicals assets because Incitec would be too big to create an equitable partnership with Pivot. Also, Pivot has no interest in Incitec’s industrial chemicals business.
Mr. Broomhead said these steps were taken after consideration of Futuris’ possible intention to vote against the buy out by Industrial Chemicals Limited.
"This could have stopped Incitec’s small shareholders and Pivot's shareholders from benefiting from the proposed merger. Incitec minorities would also be excluded from the possible effective sale of their interest in the Industrial Chemicals business.
"We felt compelled to address Futuris’ plan to potentially frustrate the choice for Incitec’s smaller shareholders to realise fair value for their share of Incitec Industrial Chemicals.
"Also, the decision to ‘de-link’ the fertiliser merger from Orica’s acquisition of 100% of the industrial chemicals assets will provide a greater level of confidence for Incitec and Pivot shareholders," he said.
Mr. Broomhead said that the valuation of Incitec’s industrial chemicals business was within the range assessed by the independent expert, had been recommended by Incitec’s independent directors and was regarded as full and fair by market analysts.
"If the demerger proceeds, ICL shareholders (other than Orica) will be offered a price of around $2.90 cash per ICL share while still retaining their Incitec shares," he said.
Mr. Broomhead said that Orica wanted to complete the fertiliser merger and the full acquisition of Industrial Chemicals, "but not at any price". "We would rather not do a deal than ignore our commitment to responsible capital management," he said.
Incitec has convened a meeting of its shareholders on October 22, 2002, to consider the resolutions to demerge ICL from Incitec.
Incitec Ltd is owned by Orica (77%), Futuris Corporation Limited (Futuris) (21%) and other shareholders (2%).