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ORICA ANNOUNCES ACQUISITION OF LEADING PERUVIAN EXPLOSIVES MANUFACTURER

Wednesday, February 19th, 2020

Orica has signed an agreement with interests associated with Grupo Breca (Breca) to acquire all of its shares in Breca Soluciones de Voladura S.A.C., and its associates’ shares in Exsa S.A. (together representing 83.5% of the total shares outstanding in EXSA S.A.), payable in cash.

Exsa, which is listed on the Lima Stock Exchange (BVL: EXSAC1):(BVL: EXSAI1), is Peru’s number one manufacturer and distributor of industrial explosives. Orica Managing Director and CEO Alberto Calderon said: “We are very pleased to announce the acquisition of Exsa, which will immediately establish Orica as the number one player in Peru, Latin America’s highest growth market, and transform Orica’s entire Initiating Systems footprint.

“Exsa’s world class Initiating Systems facility integrates the manufacture of almost every component of a detonator on site, providing meaningful and tangible synergies upon integration into the Orica network, with the ability to take advantage of significantly underutilised manufacturing capabilities.

Authorised for release to the ASX by Kirsten Gray, Company Secretary Orica Limited, 1 Nicholson Street East Melbourne VIC 3002 Australia. ABN 24 004 145 868 “The deal also increases our exposure to copper and gold, and presents significant cross selling opportunities for us to introduce Orica’s technology products and services to Exsa’s broad customer base. “The acquisition of Exsa perfectly complements our existing Latin American operations, where we already have a strong footprint. “In addition to facilitating this acquisition, the capital raising will provide Orica with greater balance sheet flexibility to continue to invest in core capital initiatives and growth engines,” Mr Calderon said.

Orica to acquire Peru’s leading manufacturer and distributor of industrial explosives •

Acquisition will establish Orica as the number one player in Latin America’s highest growth market with total material movement compound annual growth rate (CAGR) forecast at >4% to 20251 •

Will create a step-change in Orica’s manufacturing footprint, driving competitive advantage and an enhanced position in the Latin American market, with significant synergies (~US$18 million) available by combining Orica and Exsa’s operations •

Integration into Orica’s global manufacturing footprint of a new, state of the art Initiating Systems (IS) manufacturing facility. By utilising latent capacity, it will be able to significantly increase production, transform IS manufacturing capability and serve Orica’s demand across the Americas •

The acquisition price of Exsa of US$203 million (~A$302 million) on a debt free, cash free basis and assuming 100% acquisition2 , represents an expected acquisition multiple of 7.0x FY19 EBITDA post-synergies which are expected to be achieved by the third full year of ownership and 13.9x FY19 EBITDA pre-synergies3 •

Acquisition to be cash funded through a capital raising comprising a fully underwritten A$500 million institutional share placement and a non-underwritten share purchase plan capped at A$100 million with remaining funds to provide greater balance sheet flexibility to support investment in Orica’s core capital initiatives and growth engines •

The acquisition and placement are expected to be EPS neutral in the first full year of ownership and EPS accretive thereafter • FY20 EBIT impact from Exsa is expected to be neutral after taking acquisition costs into account

https://www.orica.com/
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