ORICA shareholders will vote on the demerger of DuluxGroup this morning, which, if approved as expected, will see the paints business begin trading as a stand-alone listed company from Monday.
The split is seen as positive for both companies. Matt Williams, senior portfolio manager at Perpetual Investments, said DuluxGroup had been "a bit lost" within Orica and the split would enable shareholders to choose if they wanted exposure to mining services or paint markets.
"It simplifies the [Orica] business around mining services, [it] becomes less of a conglomerate," Mr Williams said.
A Macquarie Bank analyst, John Purtell, said the demerger would allow management to focus on the core strategies of each entity and provide greater scope for growth.
But a Deutsche Bank analyst, Mark Wilson, said the demerger - expected to cost $100 million - would add little to either business. "The costs aren't prohibitive but there will be very few benefits associated with the move."
DuluxGroup - which owns the Berger, British Paints and Selleys brands - owns half of the paints market, but there are concerns that Wattyl will provide stiffer competition after being bought by the US paints giant Valspar. And Mr Williams said Dulux could attract similar interest offshore as consolidation in the global paints market continued.
"Dulux here in Australia is probably an attractive opportunity for someone at some point," he said. "There's a good chance in the medium term that Dulux will be bought by a larger global paint player."
If the demerger goes ahead, shareholders will receive one share in Dulux for each Orica share they own. Shareholders will also be asked to vote on long-term incentive plans for the new DuluxGroup executives.
Meanwhile, Orica and the chemical manufacturer Nuplex have denied media speculation that they are considering combining their chemical trading platforms before a float or to sell the merged entity.
"We clearly put out strong guidance [at Orica's half-year results last month] that we were looking for organic growth ... and we wouldn't be stepping out of our core businesses in the near future," a company spokesman said.
Frequently Asked Questions about this Article…
What is the Orica demerger and when will DuluxGroup start trading separately?
Orica shareholders voted on a demerger that, if approved as expected, will separate DuluxGroup from Orica so the paints business begins trading as a stand‑alone listed company from Monday following the vote.
How will the DuluxGroup demerger affect Orica shareholders' holdings?
If the demerger goes ahead, Orica shareholders will receive one share in Dulux for each Orica share they own, giving investors direct exposure to the paints business as a separate investment.
Will DuluxGroup shareholders vote on executive pay or incentive plans after the demerger?
Yes — shareholders will be asked to vote on long‑term incentive plans for the new DuluxGroup executives as part of the approvals tied to the demerger.
What are the expected costs of the demerger and do analysts think it’s worth it?
The demerger is expected to cost about $100 million. Opinions differ: Deutsche Bank said the costs aren’t prohibitive but saw very few benefits, while other analysts are more positive about strategic clarity and growth potential.
How do analysts say the split will change Orica’s business focus?
Analysts say the split simplifies Orica’s business by letting it concentrate on mining services rather than being a broader conglomerate, and allows management of each entity to focus on their core strategies.
Could the Dulux demerger make the paints business more vulnerable to competition?
Potentially. DuluxGroup already owns about half of the Australian paints market, but competition could intensify—Wattyl was bought by US paints giant Valspar, which may lead to stiffer rivalry.
Is there a chance DuluxGroup could be acquired after it lists separately?
Yes. One analyst noted Dulux could attract offshore interest as consolidation continues in the global paints market and suggested there’s a good chance a larger global paint player might buy Dulux in the medium term.
Are Orica and Nuplex planning to merge their chemical trading platforms or sell a combined business?
No. Both Orica and Nuplex denied media speculation that they were considering combining chemical trading platforms before a float or selling a merged entity; Orica said it is focused on organic growth and staying in its core businesses.
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