Shares in mining services group Orica (ORI) jumped 4% yesterday on the long awaited confirmation that it had completed the sale of its weakly performing chemicals business and will run a share buyback of up to $400 million.
The shares ended at $20.50 on the ASX yesterday, up 3.4%, after Orica said the sale of chemicals division to buyout group Blackstone for $750 million had been finalised.
The company had indicated its intent to return capital to shareholders after the sale of the chemicals division.
“The share buyback reflects Orica’s commitment to maximise returns to shareholders while preserving flexibility to respond to changes in the operating environment and maintain an investment grade credit rating,” Orica chief executive Ian Smith said in yesterday’s statement.
After a dual-track process, Orica decided not to demerge the chemicals unit and in November agreed to sell it to private equity heavyweight Blackstone for $750 million.
The chemicals manufacturing and distribution business has been named Ixom.
Major Australian customers include dairy giant Fonterra, Nufarm, Orica, Caltex and BlueScope Steel.
After transaction and separation costs, Orica will reap net proceeds of between $620 million and $650 million from the sale, which is close to the book value of the chemicals business.
ORI 1Y – Orica rolls out $400m buyback
