Investment bank UBS is thought to be on standby for a highly anticipated equity raising involving Freedom Foods.
The troubled $831m dairy and cereal provider is working with PwC and Ashurst after it told the market last week it had made $60m worth of writedowns relating to out-of-date stock dating back to 2017 and was reviewing its operations.
More is expected to be known about the future of its managing director Rory Macleod this week after the company advised he was on leave pending a further announcement.
A challenge for Freedom Foods is that it needs to buy contracted milk from farmers before it knows customer demand.
Some think an equity raising is inevitable.
Freedom Foods’ banks will no doubt also require an internal audit, and the details of its current state of affairs will need to be made known to the market before the group can make a cash call to investors.
The saving grace for its investors, including dairy billionaire Tony Perich with about 54 per cent of the company, 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 has net plant and equipment of $589m.
The shares crashed by about 20 per cent last week on news of the departure of Mr Macleod and chief financial officer Campbell Nicholas after the group said it was “considering its financial position”.
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