Bega swamped by share buyer interest

28 Jun, 2017 10:06 AM
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Barry Irvin: I’m delighted with the strong support we received for the placement from existing and new institutions.
Bega Cheese launched its capital raising late last week to help shore up it capital base.
Barry Irvin: I’m delighted with the strong support we received for the placement from existing and new institutions.

Existing institutional shareholders have rushed in to grab an extra slice of Bega Cheese, blocking new investor hopes of taking part in a $160 million capital raising by the dairy company.

Within a day of Bega announcing it would issue 22.9 million new shares to institutions at $5.35 each, the company’s offer was over-subscribed.

Bega shares were trading on the Australian Securities Exchange for $6.14 early this week.

“Demand from our existing shareholders was so strong most of the new interest could not be accommodated,” said executive chairman, Barry Irvin.

Bega Cheese launched its capital raising late last week to help shore up it capital base, just as it finalises its popular $460m takeover of the Kraft-branded Mondelez grocery business, including the Vegemite range.

Bega wants to prune its debt to equity gearing down to about 30 per cent and “be prepared for any future food and dairy growth opportunities which may arise”.

In addition to the institutional offer, a $37.5m share purchase plan is also opening to all existing shareholders.

Mr Irvin hoped most of Bega’s smaller shareholders would participate when that offer commenced on July 3.

Existing Bega Cheese shareholders can subscribe for up to $15,000 of new shares, subject to scale back, without incurring brokerage or transaction costs.

The issue price of $5.25 is a 10 cent discount to institutional offer and a 10.4pc discount to last week’s five-day weighted average trading price worth $5.8c/share.

“I’m delighted with the strong support we received for the placement from existing and new institutions,” Mr Irvin said.

“The proceeds from the institutional placement and the share purchase plan will improve Bega Cheese’s financial flexibility to take advantage of future growth opportunities in dairy and food as part of our vision to be a great Australian food company.”

Among the institutions showing interest in Bega in recent months has been the Central Bank of Norway (Norges Bank) which had lifted its stake to five per cent before the share offer.

Norges Bank, which invests Norway’s massive oil revenues on behalf of its government, is a frequent investor in Australian agribusiness stocks, including GrainCorp.

Swiss-based investment and financial services giant UBS also recently lifted its stake in Bega Cheese to 5.3pc.

Mr Irvin said 2016-17 had been a significant year for Bega Cheese with its “company-changing” acquisition of the Mondelez business including Vegemite, Kraft peanut butter, salad dressings and cheese lines.

That deal is to be concluded this week.

Bega also recently announced a deal with nutritional powder giant, Mead Johnson, which included selling one of its Tatura spray dryer plants and the new infant formula finishing factory in Melbourne for $200m.

Bega retained a 10-year access and service agreement which secured revenue and income streams from these plants.

The company said it had no current plans to sell the Kraft processing plant at Port Melbourne after it took over the business, despite receiving “numerous approaches” in recent months.

The NSW South Coast-based company has also confirmed a current estimate of full-year earnings before interest tax depreciation and amortisation of about $67.4m.

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