Orica agrees to buy Canada’s Terra Insights for $560m
Already the biggest provider of mine blasting services, Orica is expanding its business into monitoring civil infrastructure.
Orica will spend $C505m ($560m) to expand its technology business into civil infrastructure, having agreed to buy Canadian structural monitoring company Terra Insights from its private equity owners.
Orica managing director Sanjeev Gandhi said the deal was the culmination of a decade-long business relationship with Terra, and would help Orica expand the company’s mine-site monitoring operations into civil construction.
The explosives giant already offers mine and tailings dam monitoring services through its GroundProbe subsidiary, which uses hi-tech radar scanners and lasers, allied with high-definition cameras, to track the smallest movements in the walls of open pit mines and dams for signs of dangerous rock falls or potentially disastrous collapse events.
Mr Gandhi said Terra has provided similar services for mines alongside Orica’s GroundProbe offering, and also for civil infrastructure projects such as airports, bridges, water dams, tailings dams, mines and tunnels.
Terra’s monitoring services range from ground sensors tracking ground movements and water pressure for tunnelling projects, to satellite tracking to detect ground movement across large-scale areas for other major projects.
Orica said it would pay for the acquisition with cash already sitting on the company’s balance sheet, and through existing undrawn debt facilities, and it would have “no expected impact on Orica’s credit ratings”.
“Post funding, Orica’s balance sheet remains strong with pro-forma gearing remaining below the low end of Orica’s stated range,” the company said.
Orica said the purchase price was about 15.3 times Terra’s expected $C33m EBITDA for 2023, with the acquisition expected to close in the first half of 2024.
The company said Terra’s earnings contribution to Orica’s current financial year result was likely to be small, however, swallowed up by integration and increased financing costs.
About half of Terra’s business comes from the mining industry, and Mr Gandhi said Orica had already been helping sell Terra’s products as a complement to its GroundProbe services.
“They are domain experts in the civil infrastructure, monitoring business. We are domain experts in mining, tailings and monitoring. So it’s about cross-selling into both industries,” he said.
Orica already sells explosives and blasting services into the civil construction industry. But Mr Gandhi said the acquisition of Terra and a further expansion into the civil infrastructure sector did not represent a change of strategy for the explosives major.
“It’s not necessarily going down the path of civil, it is basically using our core competency and expanding beyond blasting for mining. What we are doing is focusing on digital technologies in infrastructure and finding applications where our offerings are complementary,” he said.
Orica bought GroundProbe for $205m in 2017 from Crescent Capital Partners, and Mr Gandhi said the acquisition was the most successful in the company’s long history.
“We have doubled and tripled GroundProbe in size since we acquired it. It’s the single most successful acquisition that Orica ever made. And we became domain experts, market leaders in the monitoring business,” he said.
Mr Gandhi said Terra’s technology platform could also be used to monitor sensitive energy infrastructure such as nuclear power plants, hydro-electric dams, new rail lines, and major projects in cities that might damage nearby buildings – beginning at construction but continuing through the life of the asset.
“It’s all about critical, sensitive civil infrastructure, which needs to be monitored to avoid any kind of accidents, damage, or safety issues. And these are long-term ‘sticky’ businesses – because you don’t just monitor once. It is constant monitoring over the life of the asset,” he said.
Mr Gandhi said that while Terra already has a strong presence in the European and North American markets, Orica planned to expand Terra’s sales efforts in Australia and South America to new and existing clients.
Orica shares closed down 2.5 per cent at $16.21.
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