Warrnambool launches $142m share offer

Warrnambool says proceeds of the share offer will be used to pay off debt.

Warrnambool Cheese and Butter has launched a $142 million capital raising, just one day after its majority shareholder warned of lower milk prices.

The 3-for-8 pro-rata entitlement offer has been priced at $6.75 a share, a sharp 18.2 per cent discount to WCB’s share price at the close of trade yesterday.

The deal is not underwritten, but its major shareholder – Canada’s Saputo – has said it will take up its full entitlement, meaning $124.8m of the raise has effectively been secured.

WCB (WCB) is planning to use the proceeds to trim its $213.1m debt load at a time when the local dairy industry faces heightened scrutiny given a recent controversial cut to the farmgate milk price from the nation’s two largest milk processors.

WCB did not follow Murray Goulburn and Fonterra in slashing prices paid to dairy farmers, but Saputo chief executive Lino Saputo Jr said cuts could be expected for the upcoming financial year.

“There might be others out there making promises that they can’t live up to — that’s not the game that we want to play,” he said.

The raising also follows a disappointing drop in profits for WCB in the most recent reporting period, with the group announcing last month its profits for the year to March 31 had slumped 87.8 per cent to $4.2m.

WCB shares rose 2.2 per cent to $8.46 in morning trade despite the planned dilution.