Share placement earns A2 Milk $40m

  • 09/10/2015
A2 Milk markets milk with a protein variant said to have health benefits (File)
A2 Milk markets milk with a protein variant said to have health benefits (File)

By Suze Metherell

A2 Milk, which markets milk with a protein variant said to have health benefits, has raised $40 million in a discounted share placement to help fund working capital in its burgeoning infant formula business.

The Auckland-based firm sold 58.8 million shares at 68 cents apiece in placement, which was over-subscribed.

It was at a 5.5 per cent discount to the 72 cents where the shares last traded on the NZX before going into a trading halt ahead of the offer, but 1 cent above the base price the company flagged on Thursday.

Goldman Sachs New Zealand agreed to underwrite the issue if there had been a shortfall.

A2 also wants to raise up to $3 million through a share purchase plan to existing investors at the same price.

The capital injection will be used mainly to drive growth of infant formula sales in China, Australia and New Zealand, where sales have been ahead of budget in the first two months of its financial year.

Australian media reported A2's biggest shareholder Freedom Foods Group wouldn't participate in the offer.

In June, Freedom Foods and Texas-based food and beverage company Dean Foods formed an investment group that was contemplating a takeover offer for the milk marketer, which A2 ultimately rejected a month later, saying it wasn't compelling.

On Thursday the company affirmed 2016 guidance for revenue to climb 72 per cent to $267 million and earnings before interest, tax, depreciation and amortisation to jump 150 per cent to $12 million before one-time items.

The company held cash and equivalents of about $6.1m as at June 30, down from almost $16 million a year earlier.

The dual-listed shares last traded at 65 Australian cents on the ASX.

NZN