Possible Demerger Orica: Dulux

Orica (ORI) shareholders will vote on the demerger of DuluxGroup this morning. The stock holders are expected to vote in favour of spinning off the paint business on 8 July 2010. They will be allocated shares in DuluxGroup on a one-for-one basis. Dulux Group is likely to list on the Australian stock market this Monday, 12 July if the demerger goes ahead.

If the split does happen, it will be clearer for investors to decide whether they want exposure to Orica's mining services or Dulux's paint market. The demerger will simplify and focus Orica's primary business and strategies around mining services. DuluxGroup –owns the Berger, British Paints and Selleys brands – owns half of the paints market, however there are concerns that a competitor brand, Wattyl, will provide stiffer competition after being bought by the US paints giant Valspar.

If the demerger goes ahead, Orica shareholders will receive one share in Dulux for each Orica share they own. Shareholders will also be asked to vote on long-term incentive plans for the new Dulux Group executives.