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Orica, the world's biggest industrial explosives maker, agreed to buy Excel Mining Systems for about US$670 million ($900 million) to add to its range of products used to shore up underground shafts from the US to China.
Excel, based in Bowerston, Ohio, has more than 45 per cent of the US market for specialty bolts and accessories for strata support in underground mining, Melbourne-based Orica said yesterday in a statement.
The acquisition will immediately increase earnings, helping Orica chief executive officer Graeme Liebelt boost shareholder returns after a A$9.95 billion ($11.58 billion) buyout was rejected in April. Orica has spent more than US$2 billion in the past two years buying rivals to expand in the US, China and Russia.
"Whenever you knock back a deal you are going to be under pressure to justify the reasons why you did it," Greg Canavan, Sydney-based analyst at Fat Prophets Management, said.
"It looks like they have got it at a reasonably good price so it shows they are financially disciplined."
Orica rose as much as A80c, or 2.9 per cent to A$28.70, and traded at A$28.59 at 10:33 am Sydney time on the Australian Stock Exchange, giving the stock a market valuation of A$8.8 billion.
Orica in April rejected an US$32 a share offer from a group led by Bain Capital Partners and Blackstone Group as too low.
Orica will pay for Excel Mining through existing debt and reinvested dividends. The deal will be completed by year end and provide cost, sales and other benefits of US$50 million annually within three years, Orica said in the statement.
"Excel is highly complementary with our existing Minova business and creates growth opportunities through geographic expansion and the ability to offer customers the complete product offering," Liebelt said.
Orica agreed last year to acquire UK-based Minova, a former BP unit whose mining products include roof bolts, membranes and chemicals used to halt water seepage, for US$880 million to tap growth in China, the world's biggest coal producer.
Excel has annual sales of more than US$240 million and has 325 employees, the company said. The company was set up in 1991 and has three plants in Ohio, one in Virginia, one in Illinois and one in Utah.
Orica will start selling Excel products in existing markets including China, Russia, the US and Australia, as well as expanding into central and Southern America.
-Bloomberg
