Infant formula business Nuchev says its $4 million capital raise will go towards developing its distribution channels and partnerships. At the same time, the company released a three-year agreement with export wholesaler H&S International.
The agreement with H&S will make it the exclusive distributor for Nuchev’s goat milk brand, Oli6 in China and Vietnam, with H&S committing to buy at least $20 million of Nuchev products over the three-year term.
Nuchev CEO Greg Kerr said the company had completed a strategic review of its China business.
“We have remained steadfastly focussed on building a meaningful presence in the Infant Formula market within the China CBEC channel.
“This deal will leverage H&S Group’s experience and networks to accelerate the growth of our products in China CBEC, into new markets within South-East Asia as well as enhancing brand equity,” Kerr said.
Performance options for H&S will be released once a year in each year of the agreement, subject to the company purchasing a cumulative $24 million of product performance hurdle. If it does, H&S could potentially own almost 35 per cent of Nuchev.
“This partnership is a first for Nuchev because we have a joint and vested interest with H&S Group being the distributor of products and also a shareholder in Nuchev. In partnering with H&S Group, both party’s economic interests are aligned to delivering results,” Kerr said.
The capital raise was structured concurrent non-renounceable pro-rata issue at a one fully paid ordinary share for every 2.59 shares held by eligible shareholders, to raise $4 million.
Founder and largest shareholder Ben Dingle has committed to talking all of his pro rata entitlement, which is around $1.8 million.
Kerr said: “The Entitlement Offer and Placement will provide Nuchev with the funds to execute our growth strategy to scale, widen our offering through innovation and enhance market diversification.
“The business has made significant improvements during YTD FY23 with regards to working capital and operations, with Inventory levels down 38 per cent and cash consumption from operations down $5.3m pcp. This is an exciting and significant step forward for us.”
