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Orica Shares Rise on Speculation of A$37 a Share Bid (Update1)

By Madelene Pearson

July 17 (Bloomberg) -- Shares of Orica Ltd. rose 5.5 percent on speculation the world's largest explosives maker may receive a second takeover offer after the company rejected a A$9.95 billion ($8.7 billion) buyout in April.

There's talk of a bid of A$37 a share, said Albert Landman, who manages more than $70 million at Tricom Futures Services in Melbourne. Orica had ``no comment,'' said spokesman John Fetter. Stuart Barton, a spokesman for UBS AG, which advised Orica when it rejected the earlier offer, also declined to comment.

Orica in April rejected a A$32 a share offer from a group led by Bain Capital Partners and Blackstone Group LP as too low. Increased sales to mining companies delivered record profit for the Melbourne-based company, making it more attractive to acquirers. The stock has gained 41 percent in the past year.

``We thought another bid would come at some time,'' said Landman. ``Activity in the stock today smells a bit and it would make a lot of sense.''

Orica shares rose A$1.66 to A$31.70 at the 4:10 p.m. close in Sydney on the Australian Stock Exchange. The company has a market value of A$9.9 billion.

The company's failure to buy Dywidag-Systems International GmbH, the biggest maker of supports used in underground coal mines in Australia, in an auction earlier this month is likely to keep buyout firms interested in Orica, Macquarie Bank Ltd. said in a research note dated July 12.

Private equity would also be attracted by Orica's low level of gearing, the ratio between its debt and its debt plus equity, the bank said. A low level of gearing may allow an acquirer to borrow more to fund a purchase.

Orica has gearing of 32 percent, versus its target of 35 percent to 45 percent, and compared with the 75 percent to 80 percent private equity would gear to, the note said.

Orica had cash of A$1 billion at the year ending September, 2006, according to Bloomberg data. The company has spent $1.3 billion buying mining-services assets in the past year.

To contact the reporter on this story: Madelene Pearson in Melbourne on [email protected]

Last Updated: July 17, 2007 03:42 EDT