Clayton Utz and Freehills have worked on the institutional sell-down of part of majority shareholder Orica Limited’s 70 per cent stake in Incitec Pivot Limited (IPL), and the proposed buy-back by IPL of Orica’s remaining shareholding. Clayton Utz advised IPL, led by partner Charles Rosedale, while Freehills advised Orica, led by Rodd Levy.
The separation of the businesses was achieved through Orica’s institutional placement of 56.5 per cent of its shareholding and IPL’s proposed selective buy-back of Orica’s remaining 13.5 per cent stake, all at $21 a share. The placement, which netted sale proceeds of $692 million was underwritten by Macquarie Equity Capital Markets.
The buy-back is still subject to shareholder approval. Rosedale said the transaction required a coordinated approach from the Clayton Utz team, which was drawn from across the Melbourne practice, with both new and existing arrangements between the two companies creating a range of complex legal issues.
“It was necessary to align the proposed share buy-back with the sell-down because Orica was the majority stakeholder in IPL and it had been responsible for a lot of the infrastructure that a listed company would normally set up itself,” he said. “The separation out of IPL required us to document the transition period within which IPL would be required to source its new infrastructure as well as re-document the two-way product supply arrangements between the two companies.”
Developing the mechanism to have that flow-on buy-back integrate properly with the sell-down was one of the more challenging elements of the deal. “The critical thing there was the maximum amount which Incitec was going to apply to the buy-back cap of $165 million.”
So far there have been few market sell-downs of this type by a controlling shareholder, Rosedale said, namely because there is no provision in the Corporations Act for such a transaction to occur. Both companies had to obtain ASIC relief for the transaction to take place without a prospectus.
He said the transaction would likely signal opportunities for similar transactions by controlling shareholders, by increasing awareness in the equity capital markets that a sell-down can be made without a prospectus, as long as that ASIC relief is obtained. Both Orica and Incitec had to ensure they were fully disclosing to the market all the price sensitiveinformation at the time of the sell-down.