Vitamin producer Blackmores has announced an equity raising of up to $117 million to strengthen its balance sheet during the coronavirus crisis, but executive director Marcus Blackmore won’t be participating.
The company will undertake a $92 million institutional placement fully underwritten by Goldman Sachs Australia and a share purchase plan of up to around $25 million.
The institutional placement will be at $72.50 a share, an 8.1 per cent discount to Tuesday’s closing price of $78.85.
Chief executive Alastair Symington said COVID-19 was driving increased demand for Blackmores’ immunity products.
“However, immunity products constitute a small part of the portfolio and benefits are offset by a lag in non-immunity products partly driven by lower shopping traffic,” he said.
The company said it was still expecting to make $17 million to $21 million in profit after tax for the year, reflecting higher costs with manufacturing and other factors associated with COVID-19.
Blackmores did not pay a dividend in March and had to seek permission from its lender to increase its debt-to-earnings ratio through June 2021.
Of the institutional placement, $50 million will be used to pay down its $153 million in bank debt, reducing its net leverage to 0.7, while $40 million will be set aside to fund Asian growth opportunities, including entry into India in FY21.
The company is also looking to divest its non-core brands as well as surplus land in Warriewood, northern Sydney.
Mr Blackmore, the son of late founder Maurice Blackmore and the company’s biggest shareholder, said in the company’s announcement he was unable to take part in the equity raising but “needless to say I am absolutely committed to being a long-term shareholder”.
Following the placement, he will still hold a 21.5 per cent stake in the company, worth about $295 million.
Mr Blackmore said he would transfer 355,000 of his shares – worth about $27.9 million – to his foundation in the coming weeks, following the example set by his late friend Paul Ramsay of Ramsay Health Care.
The Ramsay Foundation is Australia’s biggest foundation, with $3 billion in assets.