Tuesday 19th Dec, 2017

Bellamy’s to raise $60m for ‘stabilisation’, canning plant buy

Milk powder. Photo: Creative Commons / ProjectManhattan
Milk powder. Photo: Creative Commons / ProjectManhattan

Struggling infant formula manufacturer Bellamy’s has announced a multi-million-dollar share issue “stabilisation plan,” which includes acquiring a canning facility in Victoria.

Bellamy’s, whose share price peaked at nearly $14 last year before dropping to roughly $3.80 in January 2017, wants to raise $60.4 million in new equity from eligible shareholders, who will be able to buy new shares at $4.75.

Bellamy’s share price on Wednesday was $5.76.

$10.5 million of the new cash will go towards the $28.5 million acquisition of the Camperdown Powder canning facility in Braeside, Victoria, which holds licences to sell its products in China – a crucial asset to have once regulations change in January next year.

$8.5 million of the raised money will go towards capital expenditure and working capital investment to upgrade the facility. Bellamy’s believes it can expand volumes at the site from 8,000 tonnes per annum to 15,000 tonnes per annum, during the first year of operations.

A further $27.5 million of the raised cash will be a one-time payment to Fonterra, over a revised supply agreement, “to realign incentives and establish a platform for mutual growth,” the company said.

The new deal removes projected shortfall payments to Fonterra over the life of the agreement, increases operating flexibility to direct canning to Camperdown, introduces volume-based rebates and a modified bulk formula price, and secures R&D investment to improve Bellamy’s formulations, the company outlined to the ASX.

As for the remaining capital-raising spoils: Bellamy’s plans $10.4 million in general purpose expenses and working capital “to support business growth and navigate ongoing risks and challenges,” and $3.5 million in transaction and restructure costs.