Orica plans to raise up to $900 million through a one-for-eight rights issue, with Goldman Sachs JBWere acting as sole lead manager. It has agreed to underwrite the institutional raising, which will be around $600 million, but will not underwrite the $300 million retail component.
The raising will extend Goldman Sachs JBWere’s recently acquired lead in the ECM market over UBS and Macquarie, which ironically have both had advisory roles with the explosives and paints group in recent years.
A Macquarie team led by Robin Bishop advised on the joint purchase of Dyno Nobel by Orica and Macquarie in 2005, while UBS was retained last year to advise on an $10 billion buyout proposal made by a consortium led by private equity firms Bain Capital LLC and Blackstone Group LP. That proposal was rejected.
A Goldman Sachs JBWere team led by Tony Osmond and Graham Goldsmith has been discussing a possible demerger with Orica management for some 18 months. The final decision comes around one month after the company chose not to pursue the sale of its Chemnet business after initial expressions of interest proved unattractive.
Goldman Sachs JBWere will receive a modest underwriting fee of 1 per cent for the institutional offer, and a further 0.6 per cent fee for the whole entitlement offer. That means a minimum $9.4 million if there is no retail component and a maximum $11.4 million if there is a full-take up.
The decision to not underwrite the retail component was based on Orica’s assessment that the $600 million institutional offer would be sufficient, and to reduce the temptation of hedge funds to short the stock.
The rights issue is being pitched at $22.50 a share, an 18 per cent discount to its last trading price. It compares to the $32 a share offered last year by the buyout consortium.
Freehills will receive a minimum $375,000 for legal work on the offer, while KPMG will get a similar sum for its accounting advice.