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Tuesday 28 June 2022

Synlait targets $200m in equity raise

11th November 2020 By Paul Yandall | paul@foodticker.co.nz | @foodtickernz

Synlait Milk is planning to raise $200m to help it complete its investment strategy, pay down debt, and to strengthen its balance sheet.

The dual-listed company is tapping its two largest shareholders for more than half of a $180m discounted raise, with the balance to come from a $20m share purchase plan.

In an announcement to the NZX and ASX yesterday morning, Synlait said $180m would be raised via an underwritten placement at a fixed price of NZ$5.10 a share – a 14% discount on Monday’s last traded price of $5.93.

Its cornerstone shareholders – Bright Dairy Holding Limited and The a2 Milk Company – are onboard “with pro rata pre-commitments to take up shares by them and guaranteed allocation amounting to approximately $114m in total, which have been excluded from the underwrite”.

Another $20m would come from an underwritten share purchase plan.

The money would be used to “complete the investment phase of its strategy including the customisation of Synlait Pokeno and Auckland for processing and packaging equipment to service its new multinational customer”.

Synlait said on Friday that it had signed a new manufacturing supply deal with “an established, global category leader” but it did not name the customer citing confidentiality. It said then that the processing and packaging investment required to meet the new supply deal would cost $70m over two years.

The capital raise would also help strengthen the Canterbury-based company’s balance sheet to “provide more financial headroom as it navigates Covid-19, which is having an unpredictable impact on the stability of its current and future earnings”.

It would use some of the proceeds to help pay revolving credit facilities currently totalling $250m.

The equity raise came as Synlait warned of “softer demand” for its consumer-packaged infant formula for HY21.

“Synlait still expects volumes to increase in the second half of FY21 once stocks have cleared, however we are expecting our HY21 NPAT result to be significantly lower than HY20,” the company said.

“Against this, we now expect to be at or slightly below the FY20 NPAT result for FY21 as Synlait continues to focus on optimising its assets and manufacturing efficiencies.”

Its latest guidance was “subject to the unpredictable effects of Covid-19, with consumer behaviour, channel dynamics and supply chain disruptions all subject to change”.

The placement bookbuild was open to institutional and select gloabl investors, while the share purchase plan was open to eligible existing NZ and Australian shareholders, capped at $50,000/A$47,000 each.

The result of the bookbuild was expected today with the trading of its shares to resume then, after the company suspended trading Tuesday ahead of the raise. The share purchase plan would open on Friday 13 November and close on Wednesday 25 November.

New Zealand investment bank Jarden Partners was underwriter. Subsidiary Jarden Securities was the lead manager.

 

 


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