In Principle Agreement on Incitec

29th August, 2002

The Managing Director and CEO of Orica Limited, Mr. Malcolm Broomhead, today announced the proposed merger of the fertiliser assets of its 77%-owned subsidiary, Incitec Ltd, with Pivot Limited.

Subject to shareholder and regulatory approvals, the merger would create a new public company, Incitec Pivot Limited, operating an integrated fertiliser business throughout eastern and southern Australia.

Incitec Pivot Limited will have more than 800 employees, potential revenue of about $1 billion and annual fertiliser sales of more than 3 million tonnes in Queensland, New South Wales, Victoria, South Australia and Tasmania.

Shareholders in Incitec Pivot Limited would be Orica (54%), Pivot shareholders (30%), Futuris Corporation Limited (15%) and other shareholders (1%). It is planned to list the company on the ASX once the approval process has been completed.

At the same time and in order to facilitate the merger, Mr. Broomhead announced Orica’s intention to purchase Incitec’s Industrial Chemicals assets comprising explosives and chemicals manufacture and chemicals handling at Brisbane, Newcastle and Port Kembla for $315 million (the net cost to Orica of acquiring the 23% share it does not own through its current Incitec holding, will be approximately $73 million).

Earlier, Orica and Incitec announced the sale of the jointly-owned crop protection business, Crop Care Australasia Pty Ltd to Nufarm Limited. This transaction is also subject to ACCC clearance.

Completion of the transactions will deliver a number of benefits for the shareholders of Orica, Incitec and Pivot as well as customers of Incitec and Pivot.

Incitec Pivot Merger

Mr. Broomhead said the formation of Incitec Pivot Limited would release significant synergy benefits through the elimination of duplication of logistics assets and administration, through a more efficient distribution network and through improved purchasing arrangements for overseas supplied raw materials and shipping services.

Incitec Fertilisers has production and distribution assets in NSW and Queensland while the focus of Pivot operations is Victoria and South Australia.

"This merger is an exciting development for the Australian fertiliser industry and should benefit both farmers and shareholders alike," Mr. Broomhead said.

"Orica will own a smaller share of a larger and more efficient company supplying an increasing demand for fertiliser from Australia’s internationally-competitive agricultural industry.

"The merger meets Orica’s criteria for low-risk, controllable value-creation. The efficiency gains are estimated to be more than $30 million a year. The contribution to Orica of the transaction is EPS positive and the fertiliser business will meet Orica’s performance targets."

Mr Broomhead said the formation of the new company would also benefit customers. "Incitec Pivot Limited will be a strong and efficient Australian supplier in the highly competitive fertiliser market which will advantage Australia’s farmers," he said.

"The merged entity will have representation over the eastern and southern Australian fertiliser markets," he said. "This coverage will provide farmers with improved choice and reliability of supply in products and service."

Mr John Watson, Chairman of Pivot Limited, will be the inaugural Chairman of Incitec Pivot Limited. The Managing Director and CEO will be Mr. Greg Witcombe, the current CEO of Incitec Ltd. Other senior management will be composed of representatives of both companies.

Industrial Chemicals

Commenting on Industrial Chemicals, Mr Broomhead said Orica was the "natural owner" of these assets and the proposal would allow the consolidation of the activities into existing Orica businesses, generating synergies and facilitating growth.

"As more than 60% of Incitec’s Industrial Chemicals production was sold internally to Orica’s Mining Services and Chemicals Divisions, the purchase will allow us to simplify management of these businesses."

Approvals

The fertiliser merger is subject to:

• ACCC clearance,
• The transfer of the Industrial Chemicals assets to Orica
• Approval by both Pivot and Incitec shareholders.

The transfer of the Industrial Chemicals assets will proceed by Scheme of Arrangement and subsequent capital reduction and is subject to:

• Passage of the relevant demerger legislation through the Federal Parliament
• Incitec shareholder approval.

Subject to these approvals, it is intended to complete the transactions by December 2002.