OCI Resources initial offering opens lower than expectations

13 September 2013 18:35  [Source: ICIS news]

HOUSTON (ICIS)--Unit prices for OCI Resources’ initial public offering (IPO) as a master limited partnership (MLP) opened at $18.25 (€13.69) on Friday morning and then slumped to just above $18.

That is well below the $19-21 range that operators of the soda ash mining and production operation had made in their assumptions. The MLP is traded on the New York Stock Exchange (NYSE) under the ticker OCIR.

The unit price values the entire offering of 5m units at $90m and the overall enterprise at a little less than $360m, well below the $20/share assumptions that OCI had started with and overall $400m valuation that the company had hoped for.

“We’re not disappointed,” said OCI Resources CEO Kirk Milling. “That’s just one point during the day. There’s no way of knowing what will happen during the rest of the day and going forward.”

The offering is expected to close on 18 September, if conditions are met.   

Citi and Goldman Sachs handled the issue, along with co-managers Barclays and Credit Suisse. The managers have options on 750,000 units at the offering price, which would cause some dilution of per-unit value for the controlling interest in the partnership owned by OCI.

Each unit will pay owners a quarterly dividend of 50 cents for a $2, or 10% annual return, calculated at a unit price of $20 per unit. It gives them a 25.1% ownership stake in the operation, or 28%, if the banks exercise their full option.

Milling said that OCI decided earlier this year that soda ash prices were rebounding and that the time was right to expand its solar power operations.

“Investors right now are hungry for yield,” Milling said.  

OCIR is a division of Atlanta-based OCI Enterprises, itself a division of South Korea-based OCI.

OCIR will operate the trona ore mining and soda ash production of OCI Wyoming, one of the US’s largest soda ash producers operating in the Green River Basin of Wyoming. It is one of the lowest-cost producers of US soda ash.

OCI Enterprises will use the proceeds to further develop a 400 megawatt solar power utility that the company is developing in San Antonio, Texas. The project would be the largest municipal solar power field in the US.

It is a joint project of OCI Solar and CPS Energy, which has contracted to buy the power generated on the solar farm.

Milling said that soda ash prices have begun to return from a trough that bottomed out in early 2012, when the average price per short ton hit $170. Domestic US prices have since rebounded to about $200 or more.

Further pricing power could be ahead, a stock research analyst said, as improvement in the Chinese economy will likely end a soda ash surplus in the Pacific Rim, which would be a boon for US exporters.

“There is a lot of upside to US producers’ price and margin outlook,” said Longbow analyst Dmitry Silversteyn, who follows the industry.

($1 = €0.75)

By: Bill Bowen
+1 713 525 2653

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