Orica expands Digital Solutions portfolio with Terra Insights acquisition

20 Dec 2023

Key Highlights

  • Orica to acquire 100 per cent of Terra Insights (Terra), a leading end-to-end sensors, software and data delivery technology platform for geotechnical, structural and geospatial monitoring in mining and infrastructure for an enterprise value of CAD$505m1
  • Represents a complementary addition to Orica Digital Solutions – the combination of Terra with GroundProbe offers a compelling geotechnical monitoring proposition across the mining and civil infrastructure value chains
  • The purchase price represents an implied 15.3x CY2023 pro-forma EBITDA of CAD$33m2
  • The acquisition price of CAD$505m and associated transaction costs will be funded by Orica’s existing cash and committed undrawn bank debt facilities
  • Orica expects pro-forma gearing to remain below the low end of the previously stated range; no impact to Orica’s credit ratings expected
  • The acquisition is expected to be earnings per share (EPS) accretive in the first full year of ownership (FY2025)2
  • RONA from the acquisition is expected to be in line with Orica’s target range in the medium-term
  • The acquisition is expected to be completed in 1H CY2024

Orica, a world-leading mining and infrastructure solutions provider, today announced that it has entered into a binding sale and purchase agreement with Vance Street Capital LLC (via VSC RST Holdco, L.P.) to acquire 100 per cent of Terra (the Acquisition) for CAD$505m on a cash free, debt free Enterprise Value basis. Terra is a Canadian-based company that provides innovative sensors and data delivery technology for geotechnical, structural and geospatial monitoring in mining and infrastructure.

The Acquisition is expected to be completed in 1H CY2024, subject to regulatory approvals and other customary closing conditions.

The Acquisition will be entirely funded by existing cash and committed undrawn bank debt facilities, with no expected impact on Orica’s credit ratings. Post funding, Orica’s balance sheet remains strong with pro-forma gearing remaining below the low end of Orica's stated range.

Orica Managing Director and CEO Sanjeev Gandhi said:

“I am delighted to announce the acquisition of Terra today, a business that Orica has had a long-standing commercial relationship with for almost ten years”.

“Terra is highly complementary to Orica Digital Solutions and our GroundProbe business, adding additional products and capability across the mining and civil infrastructure value chains. The acquisition allows Orica to offer a more complete geotechnical offering to customers as well as adding an established stream of recurring software revenue.”

“This acquisition strongly aligns with our Digital Solutions strategy and growth in mining and infrastructure. We are excited about the medium to long term opportunities this will create for Orica.”

Mark Price, CEO of Terra said: “We are excited to partner with Orica for Terra Insight’s next chapter of growth. Given our strong working relationship with Orica for nearly a decade, this combination is a great next step to in the evolution of our end-to-end sensor and data delivery platform through working closely with Orica’s Digital Solutions and GroundProbe businesses. This is a level of collaboration that is global-minded and future-focused. Importantly, this transaction meaningfully enhances the solutions we can collectively provide to our valued customers, and expand geographically across the mining and civil infrastructure markets”.

About Terra

Terra is an end-to-end sensors, software and data delivery technology platform for geotechnical, structural and geospatial monitoring of assets in mining and infrastructure.

Terra is a rapidly growing business that assembles and distributes real-time monitoring technologies (including sensors, InSAR technology and GPS/GNSS monitoring), connectivity solutions (including data loggers and gateways), and software to customers in 90+ countries.

Terra has an attractive margin profile and is expected to achieve double-digit EBITDA growth of c. 10 per cent p.a. from CY2021-CY20233. Terra is vertically integrated and highly scalable with low capital expenditure requirements.

Strategic Rationale

  • Builds on the success of GroundProbe and establishes a global leading geotechnical and structural monitoring business
    • Terra offers a highly complementary offering of leading sensors and monitoring applications
    • Significantly expands Orica’s geotechnical and structural capabilities to monitor critical assets
    • Enables the deployment of GroundProbe’s deep domain expertise in geotechnical monitoring into the infrastructure and civil industries
  • Increases geographical exposure and future diversification of Orica’s revenue
    • Terra has strong exposure to infrastructure and civil markets as well as safety offerings, expanding Orica's growth beyond blasting
    • Strong presence in attractive North America and European markets, contributing >75 per cent of Terra’s group revenue4
  • Compelling growth opportunity leveraging combined global network and capabilities
    • Existing and established commercial partnership between GroundProbe and Terra that has spanned nearly ten years
    • Access to a rich pool of talent, assets and capabilities to foster and accelerate technological innovation
  • Accelerates growth in Orica Digital Solutions
    • Terra contributes an established stream of recurring, subscription-based software revenue
    • Strategic fit in Digital Solutions’ platform, strengthening measurement and monitoring capabilities across the mining and civil infrastructure value chains
    • Increases the proportion of group earnings from the high margin, high growth Digital Solutions business in future years5

Orica's FY2024 Outlook

  • Positive momentum from 2H FY2023 has continued in the first two months of FY2024; outlook for FY2024 EBIT from continuing operations remains unchanged (as announced at the FY2023 Results on 9 November 2023)
  • Terra’s EBIT contribution in FY2024 expected to be largely offset by integration costs; increased net financing costs and incremental amortisation to be confirmed post transaction completion.

Advisers

J.P. Morgan Securities Australia Limited is acting as financial adviser and Gilbert+Tobin is acting as legal adviser to Orica on the Acquisition. Lazard is acting as financial advisor and O’Melveny & Meyers and Davies Ward Phillips and Vineberg are acting as legal advisors to Terra.

1 Subject to customary closing adjustments. Transaction value A$561m (CAD$505m hedged at 0.9000)
2 Pre-purchase price allocation, includes run-rate net cost synergies and before transaction costs
3 Vendor pro-forma EBITDA growth
4 Based on Last Twelve Months (LTM) to August 2023 revenue
5 Based on pro-forma EBITDA estimates

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