Premium milk marketer A2 Corporation plans to raise $20 million through a placement to institutional shareholders – helping it step up to the NZX main board.
A2 Corporation, which markets milk products with an alternative protein variant, listed on the NZX alternative market in 2004 and has a market capitalisation of $441 million – making it bigger than many NZX50 companies.
Shares in A2, trading at 68c, were placed in a trading halt this morning ahead of the equity-raising announcement.
The new equity will be raised as A2’s three biggest shareholders sell a percentage of their holdings to new and existing investors for 50c per new share.
That is a 22.7% discount to the volume weighted average price since October 31, the last trading day before findings of A2's strategic view was released.
A2's major shareholders include ASX-listed Freedom Foods, Mountain Road Investments, associated with A2 chairman Cliff Cook, and DGI Fund.
Read more about how this will affect their shareholdings below.
In turn, the transaction will fund A2’s growth plans and increase liquidity in the company’s stock – allowing a shift to the NZX main board and inclusion in the NZX50 as soon as February.
A2 says it has applied to the NZX to list A2 and to quote its shares on the NZX main board.
Managing director Geoffrey Babidge says the success of its A2 brand milk in Australia had inspired wider investor interest.
”The sell-down by A2’s three largest shareholders and change in listing provides the company with greater share liquidity and increases access to capital for future growth initiatives,” Mr Babidge says in a statement today.
The extra money will be used to help it sell more of its products in the UK liquid milk and Chinese infant formula markets.
A2 also wants to boosts brand awareness here and across the Tasman and break into the Chinese liquid milk market with UHT milk sourced from Australia or New Zealand.
A new key market such as the US, Canada or Germany will also be pursued.
New, additional independent directors will be appointed to help pursue developing market opportunities in Europe and Asia-Pacific, Mr Babidge says.
Partial sell-down by major shareholders
# Freedom Foods Group Ltd (a shareholder since July 2010) has resolved to sell up to 40m shares (of its 156.6m shares).
# Mountain Road Investments Ltd (a shareholder since March 2004) has resolved to sell up to 80m shares (of its 137.6m shares).
# EGI-Fund (08-10) Investors LLC (a shareholder since September 2008) has resolved to sell up to 20m shares (of its 50.0m shares).
All three shareholders have made standstill undertakings not to sell any remaining shares in the A2 until at least 10 days after release of the company’s annual result for the year to June 30, 2013.
Eligible investors will be invited to submit applications for the placement by 5pm on Thursday.