Infant formula supplier Bellamy's will raise $60.4 million through a new issue of shares and acquire a canning facility that the company hopes will help improve margins and satisfy Chinese regulatory demands.
Bellamy's, which is seeking to turn around a disappointing financial performance, has also renegotiated its supply contract with dairy processor Fonterra which, along with Bega, manufactures Bellamy's products.
But Bellamy's says the one-off costs related to the acquisition of the Camperdown Powder canning operation and the revision to the Fonterra agreement will result in Bellamy's reporting an earnings loss in the second half of the current financial year.
Bellamy's expects of an earnings before interest and tax loss of $9.5-$14 million, instead of the previously forecast EBIT profit of $9-$13 million for the second half.
But "normalised" EBIT guidance, which excludes the one-off costs, has been increased from $11-$15 million, to between $16.5 million and $20.5 million.
The increase in normalised EBIT is due to the removal of a $5.5 million shortfall payment to Fonterra which is no longer payable under the revised agreement.
Bellamy's chief executive Andrew Cohen says the acquisition of Camperdown Powder strengthens Bellamy's strategic position.
"The acquisition will help build our brand credibility with trade partners and consumers," he said on Tuesday.
Bellamy's will issue five new shares for every 38 held by investors, at $4.75 for each new share - a discount of 17.5 per cent to the last closing price of Bellamy's ordinary shares on June 9 of $5.76.
The money raised from the entitlement offer will be used to partly fund the acquisition of the Camperdown Powder products blending and canning line at Braeside in Victoria.
Bellamy's will pay $28.5 million to acquire a 90 per cent stake in a new entity that will hold the issued capital of Camperdown.
The company also expects the Camperdown acquisition will help it achieve registration of its Chinese-labelled products in China, thereby securing a critical element of its supply chain.
Bellamy's will also be able to direct canning to Camperdown, enabling it to realise the entire margin obtained from canning.
Proceeds of the capital raising will go to a $27.5 million one-off payment to Fonterra in relation to the revised supply agreement, and to working capital.
The company said the revised agreement better aligns minimum annual volume commitments with growth and production forecasts.
Bellamy's shares - which have more than halved in value since November amid flagging sales and guidance downgrades - are in a trading halt to allow the institutional component of the capital raising.
The halt is expected to last until Thursday.
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