Warrnambool Cheese and Butter is seeking to raise $142 million through a new share offer in order to repay debt and allow investment in extra dairy production.
The maker of Coon Cheese and Sungold Milk is 88 per cent-owned by Canadian dairy giant Saputo, while Japan's Kirin holds a stake of nearly 10 per cent.
Saputo has committed to take up its full share of the entitlement offer, guaranteeing about $124.8 million of new equity for Warrnambool Cheese.
"All of the proceeds from the entitlement offer, less costs, will be used to repay debt," Warrnambool Cheese said.
"This will strengthen the balance sheet and provide greater financial flexibility to invest in strategic capital investment initiatives."
The company's net debt stood at $213.1 million at March 31.
It wants to expand capacity to manufacture cheese and other dairy products, with plans to commence a $40 million, two year project, in its current fiscal year.
Warrnambool Cheese is offering three new shares for every eight already owned by shareholders, at $6.75 per share.
The offer price is an 18 per cent discount on the $8.25 the company's shares were valued at on the market on Thursday.
The entitlement offer opens on June 20 and closes on June 29.
Warrnambool Cheese shares were up 23 cents at $8.48 at 1140 AEST.
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