Reece CEO Peter Wilson defends $600m equity raising

Peter Wilson says Reece wouldn’t have tapped market to raise $600m if the outcome wasn’t favourable to retail shareholders.

Reece Group CEO Peter Wilson. Picture: Aaron Francis

Reece Group chief executive Peter Wilson says his company would not have tapped the market to raise $600m to bolster its balance sheet if the outcome was not favourable to its long-supportive retail shareholders.

Amid the ongoing debate about the fairness of the growing number of capital raisings by listed companies during the coronavirus crisis, Mr Wilson said a number of structures were considered for the share issue — only the second in Reece’s history as a listed firm — with its adviser JPMorgan.

“When we were doing it, we thought speed was of the essence. But it was raised at the board that we had to look after the retail shareholder. If we couldn’t do that, we wouldn’t do it,’’ Mr Wilson told The Australian on Tuesday.

“People like (deputy chairman) Tim Poole pushed that hard because he knows what our family thinks about that issue. He knows how I think, how my dad thinks. The board pushed back on structures that weren’t supportive of retail shareholders.”

Reece on Wednesday launches the retail component of its fully underwritten three-for-55 retail entitlement offer after last week successfully securing $600m from institutional investors for its institutional entitlement offer and institutional placement.

That raising was made at a modest 12.5 per cent discount to the last traded share price before Reece shares were put in a trading halt last Monday. The placement accounted for less than 9 per cent of Reece’s issued capital.

Retail shareholders will be able to subscribe for new shares at $7.60 per new share, the same price as the institutional offer. Reece shares closed 15 cents lower yesterday at $8.90.

The Wilson family that controls Reece, which has a network of retail stores across Australia, New Zealand and two years ago made its first step into America, will take up its allotted $170m worth of new shares in the retail offer to see its stake in the 100-year-old business fall to 67.7 per cent, from 73.3 per cent.

At the end of March the Australian Securities & Investments Commission and the Australian Securities Exchange announced temporary emergency capital raising relief to help facilitate capital raisings. It allows listed companies to issue 25 per cent of new shares — up from the previous threshold of 15 per cent — provided that they make an entitlement offer or share purchase plan as a follow-on to the placement at the same or lower price.

In the Reece SPP a retail shareholder will be able to invest up to $30,000, at the same price as in the institutional placement.

“The ASX rule changes didn’t weigh on us at all, it was about doing what was right for all the stakeholders,’’ Mr Wilson said.

He said Reece was able to issue the shares at a narrow discount because “we were in control”.

“We did not need to do it,’’ he said, reiterating that the money was raised to bolster Reece’s balance sheet so it can capitalise on future opportunities following the coronavirus pandemic.