Metcash has launched a $330 million capital raising following its increase in sales during the COVID-19 pandemic, aiming to strengthen the support of its retail network, as well as complete three bolt-on acquisitions worth $45 million.
The equity raising includes a $300 million fully underwritten institutional placement and a non-underwritten share purchase plan of up to $30 million. The placement price will be offered to institutional investors at $2.80 per share, and represents a 7.9 per cent discount to its last traded price on Friday (17 April) at $3.04.
An additional $180 million of short-term debt facilities from existing lenders is expected to provide Metcash with $852 million of proforma headroom.
“The COVID-19 pandemic has presented a unique set of challenges for Australian businesses including an unprecedented level of uncertainty,” said Metcash Group CEO Jeff Adams.
“We have responded by changing our key priorities during this period to protecting the health and wellbeing of our people; keeping our supply chains open to ensure delivery of essential goods; and protecting our balance sheet.”
Adams said the company has invested in additional working capital to support its retailers during the pandemic, particularly in its liquor business, where Australian and New Zealand customers are subject to restrictions.
Metcash’s food business has been strong due to “a change in consumer behaviour related to the COVID-19 restrictions,” said Adams.
“We have, however, incurred higher costs to both fulfil these sales and manage higher health and safety risks.”
“The equity raising together with the new debt facilities should provide us with flexibility in this uncertain environment. It will enable us to continue to support our independent retailers through this challenging period and progress our MFuture growth program. We will also be able to consider potential new growth opportunities should they arise and align with our strategic direction."
Three bolt-on acquisitions by Metcash are expected to close in 1H21, worth around $45 million, as a result of the “additional financial flexibility” offered by the capital raising.
Total supermarket sales for the five months ended March increased by 4.8 per cent (up 8.9 per cent excluding Drakes), while liquor sales increased by 3.2 per cent.
Metcash says, “it is unknown to what extent the elevated sales will continue, including once restrictions are relaxed or lifted”.
In December, Metcash announced a $237.4 million impairment to goodwill and other assets in its food business after 7-Eleven would not renew its east coast supply contract, which expires in August 2020.
