Blackmores share price: implications of the planned $117m equity raise

ASX-listed health supplements company Blackmores Limited (BKL) today announced the details behind a $100 million plus equity raise.

All up, the company revealed that it is looking to raise $117 million: made up of $92 million fully-underwritten institutional placement; and a $25 million non-underwritten share purchase plan (SPP), available to eligible shareholders.

Centrally, these freshly issued placement shares would be issued at a fixed price of $72.50 per share, representing a modest discount to Blackmores last-traded price of $78.85.

On the institutional side of the raise, Blackmores intends to issue 1.3 million new shares, with the placement being led by Goldman Sachs. For reference, the company currently has 17.41 million shares outstanding.

Secondly, looking at the specifics behind the SPP, the company noted that the amount raised by the purchase plan will be subject to applicant demand, with the company further saying that it may scale back the offering at its discretion.

Unlike the fixed issue price of the placement, the company specified the issue price of the SPP will be the:

‘Lower of the Placement Price; and a 2.5% discount to the 5-day volume-weighted average price of Blackmores’ shares up to, and including, the closing date of the SPP (currently expected to be Friday, 3 July 2020); and a 2.5% discount to the closing price of Blackmores’ share on the closing date.’

Blackmores share price: implications of the raise

Overall, the company said it would use $40 million of the funds from the institutional side of the placement to accelerate growth in Asia and invest in an efficiency program.

‘China remains a key focus for Blackmores. The Company will invest to expand its organisational capabilities, drive innovation in a new “Modern Parenting” product line and explore opportunities for local partnerships,' Blackmores said.

The other $50 million from the institutional placement will be used to shore up Blackmores' balance sheet, with the company expecting to have $236 million in pro forma liquidity available, post-raise.

Finally, speaking of the purpose behind the equity raise, the Blackmores CEO, Alastair Symington, said:

‘It will enable us to accelerate our growth initiatives in Asia and invest in our efficiency program which will help us to achieve our objective of returning Blackmores to sustainable, profitable growth.’

Blackmores noted that its previously guided FY20 earnings guidance of between $17 million to $21 million remains unchanged.

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