Omnia to wipe out debt with Oro Agri sale


Omnia to wipe out debt with Oro Agri sale

Published Date: 2020-10-20 | Source: Stephen Gunnion | Author: Stephen Gunnion

Omnia to wipe out debt with Oro Agri sale

The fertiliser and chemicals group says the disposal gives it the opportunity to de-risk its capital structure and return cash to shareholders.

Omnia has reached a deal to sell Oro Agri in a deal that will wipe out its remaining debt and return cash to shareholders. It says the buyer, European-headquartered Rovensa, will be in a better position to fund the growth of the AgriBio business it bought just over two years ago.

The fertiliser and chemicals group first announced the potential sale last week after it received an unsolicited approach by Rovensa. While it wasn't planning to sell Oro Agri, it said the non-binding offer warranted further investigation.

Rovensa's offer is based on an enterprise value of $165 million for Oro Agri and will translate into cash proceeds of about $152 million (R2.5 billion) after allowing for a 25% minority interest in Oro Agri Brazil and the company's net debt. Omnia paid $100 million for the business in 2018. It said the priced reflected the synergies that existed between Rovensa and Oro Agri, that Omnia didn't have. Rovensa produces and distributes biocontrol, bionutrition and crop protection solutions while Oro Agri is involved in the research and development, production and sales of a range of patented agriculture biological products. Omnia said it had been a relatively passive investor and in order to enable its full potential, it would have to invest significant additional capital in Oro Agri and fully integrate it into its operations.

Omnia's debt declined to R1.88-billion at the end of March from R4.4-billion a year earlier, helped by a R2 billion rights issue in 2019. While it was now at a level that it didn't impact its trading, it still required careful capital allocation to support growth across its business.

Gobalsamy said the proceeds from the disposal would be used to repay debt and position the company with a strong financial base to fund organic growth and working capital. The company planned to review its dividend policy and said it would also make any decision to return surplus cash to shareholders, through a special dividend and share buybacks, when it announced its 2021 financial results next year.

Omnia's shares rose 1.8% to R40.64 yesterday.

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