Smarter drilling
Need to know
- ORI to acquire Axis Mining Technology for $260m cash plus (up to) $90m earnout
- 2$650m institutional equity placement plus $75m share purchase plan at $16.00/share
- Axis adds to ORI's digital orebody intelligence business
Investment implications
ORI is paying up to $350 million to acquire Axis Mining Technology. This strategic acquisition adds to ORI’s leading full-service orebody intelligence service providing mine-to-mill solutions. Providing precise geophysics gives resource companies more accurate orebody information that can greatly enhance the effectiveness and efficiency when mining an orebody. Axis has particular expertise in gold and copper that will enhance ORI’s Digital Solutions platform.
ORI will pay $260 million cash upfront plus up to $90 million as an earnout by December 2024. The implied acquisition multiple is 11.8x FY22f EBITDA excluding any synergies based on the upfront cash payment.
ORI will raise $260 million in a fully underwritten institutional equity placement of 40.6 million new shares at $16.00 per share. A Share Purchase Plan to raise $75 million (not underwritten) for up to $30k per eligible shareholder at the placement price or a 2% discount to the 5 day VWAP of ORI shares before the closing date (26 August).
The proceeds of the equity raising include $282 million of working capital and balance sheet capacity. ORI’s pro forma gearing post the capital raising and acquisition will be 27.9%, compared to 38.3% as at 31 March 2022.
At face value, the new equity will be EPS dilutive as it will add approximately 10% to the company share count. ORI says the Axis acquisition will be EPS accretive in its first full year of ownership. The synergies have not been detailed but we anticipate these to be small.
The potential $90 million earnout payment by 31 December 2024 is relatively large which could result in the final multiple paid for Axis to be well below the initial mark provided.
ORI reaffirmed its FY22f guidance is unchanged.
This commentary reflects our initial view. For detailed reports for companies under Sandstone Insights coverage, see our latest research notes for our investment view and specific risks associated with investing in these companies.
Stock overview
Share price
Company overview
Orica is a global blasting systems and mining chemicals business.
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