Freedom Foods seeking advisers for equity raising in region of $100m
Dairy and cereal producer Freedom Foods is understood to have launched a beauty parade to find advisers for a highly anticipated equity raising expected to be worth at least $100m.
UBS, Goldman Sachs, Credit Suisse and Citi are understood to have pitched for the role.
Advisory firm Moelis is already working with the company.
Freedom Foods is also expected to call its long-time adviser UBS to tap the market, and another bank is also expected to be sought.
It comes after Freedom Foods announced the shock departure of its top management and the writing down of out-of-date stock in the middle of the year, sending its shares more than 20 per cent lower.
The company has reached a standstill agreement with its lenders, and its shares have not traded since.
The equity raising is likely to occur in about two weeks, sources say.
The capital raising is likely to involve the Perich family securing a larger stake in the food processor, which is best known for soy and dairy products.
The Perich family currently have a 54 per cent stake and is prepared to back the company.
Freedom Foods is now run by Michael Perich.
The company has revised the writedown of its inventory to $60m, from about half that level earlier.
The troubled $831m dairy and cereal provider had already been working with PwC and Ashurst, and other operations have been under review.
One challenge for Freedom Foods is that it needs to buy contracted milk from farmers before it knows customer demand.
And one of the looming risks for Freedom Foods is a class action.
But the saving grace for its investors is that its dairy factory at Shepparton and its Ingleburn factory — where plant-based products are produced — are valuable and could be sold following an internal review.
One idea is for the company to split the business in two and sell off the plant-based operations, which would include the Ingleburn factory.
Citi analysts said in a research note that Freedom Foods had net plant and equipment of $589m.
Elsewhere, analysts at UBS have backed the Select Harvest acquisition of Piangil Almond Orchard in northwest Victoria.
The $129m acquisition was first flagged by DataRoom on Thursday.
It adds 20 per cent to Select Harvest’s growing area, with 1566ha of almond orchards.
In a research note, the UBS analysts say the strategic rationale for the purchase looks solid, with increased scale of owned almond operations near Select Harvest’s Carina West facility, which would underpin processing cost efficiencies.
The orchard had high yields with upside potential, the analysts said.
Another plus was that the almond orchards were in a favourable growing region and had a less mature profile than Select Harvest’s other assets, with the average age being 10.9 years compared to 12.6 years.
While almond prices are currently depressed, they have improved in recent weeks, up 10 per cent, despite remaining at or below California’s cost of production.
Last week, Select announced a $120m equity raising at $5.20 per share to fund the acquisition.
It is assisted by advisers Bell Potter, Pac Partners, Select Equities and transaction adviser Kidder Williams.
The raising was at a 6 per cent discount to Select Harvest’s last traded share price of $5.46.
For the year ending September, Select Harvest said it expected its earnings before interest and tax to be in line with consensus.
The almond grower announced a $17.4m net profit for the first six months of its financial year.
Select Harvests is Australia’s largest almond grower and processor, and is the third-largest grower worldwide.
It manages almond orchards in Victoria, NSW and South Australia, and is also involved in the manufacture of a variety of food snacks and muesli.
Its market value is $528m.