Menu Close

Brit Billionaire Increases AACo Stake

British billionaire Joe Lewis will increase his stake in Australian Agricultural Company to almost 20 per cent as the cattle company looks to raise $299 million to shore up its stretched balance sheet.

The Bahamas-based Mr Lewis, who owns English Premier League club Tottenham Hotspur, has backed the board at a time when other major investors are selling down or not taking up entitlements.

The raising, which will be used to pay down debt and fund construction of its $91 million Darwin abattoir, consists of a $219.2 million entitlement offer and $80 million in convertible notes.

AACo chairman Donald McGauchie said the raising would strengthen the company’s balance sheet and accelerate its integration strategy.

“While AACo’s fundamentals remain strong, a highly cyclical market and constrained capital structure has not allowed the company to capitalise on its asset base,” he said.

AACo has a history of poor returns and weak cash production, and the stock has often traded below its asset value since it listed in 2001.

There will be a 7-for-10 accelerated, non-renounceable entitlement offer issuing 219.2 million new AACo shares at $1 each, raising approximately $219.2 million.

The issue price represents a 9.1 per cent discount to the theoretical ex-rights price and is fully underwritten.

Joe Lewis, who already owned 13.5 per cent of AACo, will take up his $29.6 million entitlement in full and provide a sub-underwriting commitment of a further $34.6 million.

Mr Lewis’s AA Trust will subsequently own 19.99 per cent of the company. However the AA Trust stake could rise to 29.2 per cent assuming the $80 million convertible note issued to the Trust is converted at its maturity in 2023.

The almost $300 million in new capital will be used to fund the remaining $67 million cost of building the Darwin abattoir, with $20 million of further working capital requirements. Senior debt will be reduced by $205 million, taking the company’s gearing from 40.9 per cent to 23.5 per cent.

Mr McGauchie said the company could not afford to be purely a primary producer and needs to focus on value adding.

“It’s very important to improve returns on capital and we aim to have a company worth well in excess of its parts,” he said.

The IFFCO-Felda joint venture has opted not to take up its entitlement for the second time, and its 16.9 per cent stake will be diluted.

Source: Stock Journal

Posted in Business

Related Posts