Bega Cheese is offering ordinary shareholders the chance to buy up to $15,000 in new shares, at a discount, as part of a $250 million capital raising to help bolster its books after its big Koroit dairy factory purchase.
The fast-expanding dairy and food company has just secured $200m in institutional funding towards the capital raising, releasing 27.8m shares at $7.20 each – a five per cent discount to the company’s share price late last week.
Retail shareholders can apply for their quota of a further $50m worth of shares selling at $7.10 each.
Bega, which paid $250m for the former Murray Goulburn plant at Koroit in south western Victoria from Canadian dairy heavyweight, Saputo, aims to process up to 450m litres at the site this financial year.
The butter, milk powder and nutritional powder production site was receiving 300m litres/year when Bega took over last month.
It is expected to generate earnings before interest tax and amortisation of at least $20m in 2018-19.
It sits in one of Australia’s most productive dairy regions where milk production totals about 2 billion litres annually.
Executive chairman, Barry Irvin, said the company was working hard to utilise “substantial” spare capacity at Koroit, including looking at other value-added product strategies to introduce at the plant.
This week’s capital raising initiative coincides with Bega also becoming the second biggest shareholder in the nation’s biggest honey brand, Capilano, after paying up to $21 a share.
However, despite speculation about his longer-term ambitions in the honey market, Mr Irvin said there were no definite plans about Capilano beyond Bega taking a nine per cent stake in the business.
“It is about just making sure our company has flexibility, but we've made no decision on Capilano," he said.
The $250m capital raising would ensure Bega was appropriately geared “should any further opportunities arise”, after paying down debt.
“Bega Cheese has always had a commitment to maintaining a strong balance sheet,” he said.
The capital raising is expected to keep Bega’s debt at around $250m.
The company, which became a major player in the spreads and sauces market last year after buying a suite of Kraft brands from Mondelez Australia for $460m, reported a 45pc jump in normalised profit after tax in 2017-18 to $44m.
Sales grew 29pc to $430m, also aided by the acquisition of Queensland’s Peanut Company of Australia processing business late last year, with PCA’s integration now running ahead of expectations.
A move into honey is considered a natural spread for Bega’s spreads business, which intends increasing its customer reach with new products and channel expansion.
The former NSW South Coast former dairy co-operative began buying Capilano shares in May prior to the honey company’s board giving the green light to a takeover scheme of arrangement offer, at $20.06 a share, from Sydney based private equity players Roc Partners and Wattle Hill.
That offer is led by former Prime Minister Kevin Rudd’s son-in-law, Albert Tse, whose $200m Wattle Hill fund has taken key positions in several food processors in the past two years, with a keen eye on markets in Asia, and particularly China.
Bega’s share purchase offer to shareholders will close on October 18, with new shares to start trading on the Australian Securities Exchange at the end of the month.