Freedom Foods Group has successfully completed its capital raise, with an oversubscribed wholesale investor offer raising $265 million. After a grim 18 months, it marks a key point in the company’s recapitalisation to fund its operational and financial turnaround.
Total subscriptions from existing and new investors reached $138.9 million.
It meant the group’s majority shareholder Arrovest could reduce its minimum commitment from $135 million to $126.1 million, accommodating $8.9 million in oversubscription under the wholesale investor offer.
Freedom Foods Group chair Genevieve Gregor said the result was an endorsement of its turnaround strategy.
“The completion of this recapitalisation will enable Freedom Foods Group to substantially repay its band debt, providing us with the financial flexibility to execute the turnaround strategy and return the company to long-term sustainable and profitable growth for the benefit of all shareholders and investors,” Gregor said.
The company lodged its recapitalisation plan in March, as the company lifted its nine-month trading halt. The return to trading saw its share price plummet 82 per cent to 53 cents. They are currently trading at 43 cents a share.
Freedom Foods said the proceeds will repay between $183-$233 million of the company’s existing debt and provide a more flexible capital structure for the financial and operational turnaround of the company. It would include two years of financial covenant-free senior debt and six years of financial covenant-free notes.
Gregor said the capital raise will repay roughly $231 in bank debt, with the balance going towards working capital.
“I can say with confidence that, at every level, this is a demonstrably better managed and better governed business than it was 12 months ago. The missing piece has been a stable, long-term capital structure,” she said.
She outlined the “two cornerstones” of the company’s growth strategy - plant-based milks, primarily its Milklab brand, and Dairy and Nutritional.
The group launched its first consumer-facing advertising campaign this month for Milklab.
In Dairy and Nutritionals, Gregor said the business was undergoing “significant operational turnaround”. “This transformation strategy is focused on a number of areas, each critical to returning the business to sustainable and profitable growth, including reducing wastage, improving production efficiencies, removing or reducing unprofitable products, optimising milk supply and curtailing losses from the sale of surplus milk, as experienced in the past,” she said.
The support of Arrovest underpins the recapitalisation plan, Gregor added, saying the Perich family had been a committed shareholder for more than 15 years and would remain so.
It is almost a year to the day (29 May) the then CEO Rory McLeod told the ASX the company was “reshaping” its commercial and organisational structures and there would be around $21 million in inventory write-downs.
Within a month he was gone and the inventory write-downs were revised to be closer to $60 million, with $10 million in bad debts.
By December 2020, the full horror of its FY20 was laid bare: $590 million in write-downs; almost $175 million in losses for the year, having to restate several years’ results, including FY19 pivoting from an $11.6 million profit to a $145.8 million loss.
There are two class actions, US arbitration for a contract dispute with Blue Diamond Growers, an investigation by ASIC, a board restructure, a failed investor deal, the offloading of its Cereals and Snacks business (and the Freedom Foods brand name) and looking for a buyer for its Speciality Seafood business.
