The Orica Ltd (ASX: ORI) share price is in focus today after the company announced the settlement of US litigation and a new acquisition in North America. Highlights include resolving the CF Industries dispute for US$169.5 million and moving to acquire Nelson Brothers' US explosives business.
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What did Orica report?
- Settled litigation with CF Industries for US$169.5 million, funded from existing cash and undrawn debt facilities
- Agreement to acquire Nelson Brothers' US explosives business for US$25 million plus retirement of US$48 million in debt
- Transactions expected to be earnings per share (EPS) accretive in the first full financial year
- Acquisition to boost EBIT by AUD$35 million per year once fully integrated
- Increased exposure to the strategic North American market, especially US Quarries and Construction sectors
What else do investors need to know?
Orica's settlement with CF Industries brings an end to litigation that began in October 2023, with no admission of liability by either party. This move removes a significant source of uncertainty for Orica's shareholders and customers.
The acquisition of Nelson Brothers' explosives business will give Orica full ownership of four US emulsion plants and wider access to downstream markets. The deal also expands Orica's exposure in critical end markets through improved supply chain and delivery capabilities, plus enhanced opportunities for cross-selling its product and service offerings.
What did Orica management say?
Orica 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.
What's next for Orica?
Looking ahead, Orica expects the combination of the litigation settlement and new acquisition to simplify its business structure and create greater operational resilience. Management sees upside through increased presence in the attractive North American market, as well as potential revenue growth and business synergies from the Nelson Brothers acquisition.
The integration of the newly acquired business and a move to diversify Orica's ammonium nitrate supply are aimed at supporting sustainable long-term growth and further protecting customer supply chains.
Orica share price snapshot
Over the past 12 months, Orica shares have risen 11%, slightly outperforming the S&P/ASX 200 Index (ASX: XJO) which has risen 10% over the same period.
