Orica has entered into a binding agreement to acquire Axis Mining Technology (Axis), a leader in the design, development and manufacture of specialised geospatial tools and instruments for the mining industry.
Key Highlights
- Represents a highly strategic acquisition and a valuable addition to Orica’s Digital Solutions platform, creating a leading full-service Orebody Intelligence business and positioning Orica to become the industry’s first integrated, end-to-end, mine to mill solutions provider
- Axis’ geospatial technology accelerates Orica’s capabilities to support new mineral discoveries required for decarbonisation – as new mineral discoveries are increasingly located at greater depths and demand more precise geophysics1. Axis’ gold and copper exposure also accelerates Orica’s broader commodity mix objectives
- The combination of Orica and Axis is expected to deliver compelling growth opportunities for both businesses, through its combined global network and capabilities
- Acquisition purchase price comprises upfront cash consideration of A$260 million2 and a deferred earn-out payment up to a maximum of A$90 million, contingent on financial performance and other conditions being met3
- Implies an acquisition multiple of 11.8x FY22F EBITDA4 (excluding pro forma synergies) based on the A$260 million upfront cash consideration
- Acquisition (including both Upfront Consideration and Earn-Out), and associated costs to be funded through the proceeds of a fully underwritten A$650 million institutional share placement. Orica will also offer a non-underwritten share purchase plan capped at A$75 million to eligible shareholders in Australia and New Zealand
- Remaining proceeds of the Placement and SPP will be used to fund incremental trade working capital requirements arising as a result of global supply chain dislocations, and also provide balance sheet capacity
- The Acquisition and Placement are expected to be EPS accretive from the first full year of ownership5, and the RONA contribution from the Acquisition is expected to be in line with Orica’s stated guidance of 10-12%
Acquisition Overview
Orica (ASX: ORI) is pleased to announce that it has entered into a binding agreement to acquire 100% of the share capital in the entities that own Axis Mining Technology (Axis) (the Acquisition), for A$260 million in cash (Upfront Consideration)2.
In addition, a deferred earn-out payment up to a maximum A$90 million (the Earn-Out) is payable based on Axis’ cumulative EBITDA generated from 1 October 2022 to 31 December 2024, and contingent on certain key management remaining employed by Orica during the Earn-Out period3. Any amount payable under the Earn-Out will be paid after the expiration of the Earn-Out period, being 31 December 2024. Completion of the Acquisition is expected to occur by October, subject to satisfaction of conditions precedent.
Axis is a leader in the design development and manufacture of specialised geospatial tools and instruments for the mining industry. Axis represents a highly strategic acquisition and a valuable addition to Orica’s Digital Solutions platform, positioning it to become the industry’s first integrated, end-to-end, mine to mill solutions provider. Axis’ existing management team will enter into new employment agreements with Orica and are committed to ensuring a successful integration of the business.
Orica Managing Director and CEO Sanjeev Gandhi said: “We are extremely pleased to welcome Axis into Orica. This strategic acquisition further strengthens our existing Digital Solutions vertical and expands our Orebody Intelligence portfolio upstream.
“Orica’s purpose is to sustainably mobilise the earth’s resources and achieving this starts with a better understanding of the orebody at the start of the mining value chain. I believe that Axis’ differentiated geospatial tools and instruments, combined with our existing suite of digital solutions will provide compelling orebody intelligence to customers and support the delivery of the industry's first end-to-end solutions platform, from mine to mill.
“The integration of Axis’ technology and expertise will accelerate our ability to support our customer’s digital transformation efforts around the world, helping them to operate more efficiently, sustainably and safely.
“In addition to facilitating the Acquisition, the Equity Raising will allow Orica to fund incremental trade working capital requirements arising as a result of global supply chain dislocations, and also provide additional balance sheet capacity,” Mr Gandhi said.
Equity Raising Overview
The Acquisition (including both Upfront Consideration and Earn-Out), and associated costs will be funded through the proceeds of a fully underwritten A$650 million institutional share placement (Placement). Orica will also undertake a non-underwritten share purchase plan (SPP) to eligible shareholders in Australia and New Zealand (up to an aggregate cap of A$75 million) (together with the Placement, the Equity Raising).
The balance of funds raised under the Equity Raising will be used to fund incremental trade working capital requirements in the medium-term arising as a result of global supply chain dislocations. Funding will also provide Orica with balance sheet capacity to respond to changes in the external operating environment, as current market conditions necessitate a more disciplined approach to capital management.
The Acquisition and Placement are expected to be EPS accretive from the first full year of ownership5, and the Return on Net Assets (RONA) contribution from the Acquisition is expected to be in line with Orica’s stated guidance of 10-12%.
About Axis
Axis is a growing business that designs, manufactures and distributes specialised navigation instrumentation, data and drilling solutions for the mining industry. Axis has a differentiated market position, offering a comprehensive suite of tools and instruments to meet customers’ geospatial requirements.
Axis operates a vertically integrated, scalable business, with low capital intensity and an attractive margin profile. Products are manufactured and assembled at Axis’ UK and Australian facilities, and distributed to over 30 countries, with earnings primarily generated through recurring product rental. All Axis employees are expected to remain with the business under Orica’s ownership.
1 CSIRO, METS – A Roadmap for unlocking future growth opportunities for Australia (2017)
2 Acquisition price on a debt free, cash free basis, subject to completion adjustments including for movements in working capital
3 Any Earn-Out payment will only be paid if the earn-out executive remains remains employed by Orica for the entire duration of the Earn-Out period; unless granted good leaver status by Orica during the Earn-Out period
4 Based on September year end EBITDA figure (pre IFRS-16)
5 EPS before individually significant items and the amortisation of intangibles. The impact of purchase price accounting has not been finalised which will impact future amortisation charges