Blackstone Buys Australian Chemicals Business

By Ross Kelly 

SYDNEY-- Blackstone Group LP paid 750 million Australian dollars (US$655 million) to buy a chemicals business from Australia's Orica Ltd. that makes everything from dyes to fertilizers.

Until now, the U.S. private-equity firm has only been an active buyer of Australian real-estate assets. It acquired Valad Property Group in 2011 and has since bought Australian office towers from companies including GE Capital and Mirvac Group.

Private-equity firms including Blackstone, KKR & Co. and TPG Inc. built large war chests after taking advantage of buoyant share markets to sell earlier investments worth hundreds of billions of dollars combined.

Australia is one of the few countries in the Asia-Pacific region, apart from Japan, where private-equity firms can deploy large amounts of money and buy out targets. Earlier this year, TPG bought property services business DTZ from Australia's UGL Ltd., while KKR and TPG failed in separate bids to acquire vintner Treasury Wine Estates Ltd.

The deal allows Orica to concentrate on producing explosives for customers including coal miners, which accounts for the vast majority of its profits.

Analysts had estimated it could get up to A$1 billion for the chemicals business. Earlier this month, J.P. Morgan valued it at A$640 million, including debt, and said a trade-sale price above A$800 million would be accretive to Orica.

The Melbourne-based company had also mulled a possible demerger but said it decided a trade sale would generate higher value for shareholders after it was approached by "a number" of third parties.

"The certainty as to value and outcome of this transaction is a good result for Orica shareholders," Orica's chief executive, Ian Smith, said in a statement.

Orica also booked a 1.7% rise in net profit for the year through September to A$602.5 million. Earnings before interest and tax fell 4%, and the company said it doesn't expect a significant improvement in resources markets in the current fiscal year.

Write to Ross Kelly at [e-mail]

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