Orica Ltd (ASX: ORI) shares are on the move on Monday morning.
At the time of writing, the ASX 200 industrial stock is down over 2% to $19.23.
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Why are Orica shares falling today?
The catalyst for the move appears to be news that Orica has reached a settlement in a long-running legal dispute in the United States and has agreed to make an acquisition.
According to the release, Orica has settled litigation with CF Industries (NYSE: CF) for a payment of US$169.5 million (A$242.3 million). The dispute began in October 2023 and the settlement has been reached with no admission of liability by any party.
Management said the agreement removes litigation uncertainty and will allow the company to establish a more diversified supply base for its US operations, strengthening security of supply for customers in the region.
The payment will be made in the second half of FY 2026 and funded using Orica's existing cash and undrawn committed bank debt facilities.
ASX 200 stock announces US acquisition
Alongside the settlement, Orica revealed that it has agreed to acquire 100% of the explosives business of Nelson Brothers, its current joint venture partner in the United States.
The deal will see the ASX 200 stock purchase the outstanding membership interests in Nelson Brothers LLC and Nelson Brothers Mining Services. Under the agreement, Orica will pay US$25 million and retire US$48 million of existing debt associated with the explosives business.
The acquisition will provide Orica with four emulsion plants, initiating system magazines located in key markets, and mobile manufacturing unit bulk explosives delivery vehicles. It will also increase storage capacity and provide direct channels to market in the US quarries and construction sectors.
Management expects the transaction to close in the second half of FY2026, subject to due diligence and final agreements.
Commenting on both developments, the ASX 200 stock's managing director and CEO, Sanjeev Gandhi, said:
Orica has agreed to settle this litigation with CF following careful consideration and in the best interests of shareholders and customers. Our focus remains on executing our strategy, advancing our growth initiatives and delivering sustainable value for customers and shareholders. Importantly, our actions have ensured there has been no disruption to customer supply, and we remain committed to strengthening security of supply for our customers through a diversified and resilient sourcing strategy in North America.
The combination of the settlement and the acquisition of Nelson Brothers' US Explosives business will further strengthen our North American region, deliver immediate earnings benefits and support our strategy to grow in attractive downstream markets.
