Wattle taps debt market for $46m Blend and Pack buy
By Simon Evans
Feb 11, 2019 — 11.27am
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Share Infant formula company Wattle Health will pay $46 million to move to majority ownership of the Blend and Pack dairy products processing and packaging facility in outer Melbourne owned by a Hong Kong-listed company, Mason Group.
Wattle has signed the conditional agreement to move to 51 per cent of Blend and Pack and intends funding the deal with a debt package managed by Exotix Capital. Wattle owns 5 per cent of Blend and Pack, a high-speed processing and packaging operation based at Hallam in Melbourne's outer suburbs.
Under a complex transaction, Wattle is also entering into a "put and call option deed" where it can acquire a further 29 per cent stake in Blend and Pack. Blend and Pack makes infant formula and dried dairy products for outside customers. In 2017-18, it generated revenue of $20 million-plus and earnings before interest, tax, depreciation and amortisation of "in excess" of $3 million, Wattle said.
Wattle Health Australia executive chairman Lazarus Karasavvidis didn't want to dilute equity holders any further, and so the $46m deal to buy a bigger stake in a packaging plant is being funded by a debt package.
Wattle shares gained 6 per cent in early trading on Monday to $1.05. The stock has been on a rollercoaster ride since Wattle listed in early 2017 with an issue price of 20¢ per share. In mid-2018, it was off the ASX boards for more than a month as it raised $54 million at $1.25 per share in a placement and rights issue at a hefty discount to the prevailing price. That was a separate deal to acquire a 45 per cent stake in a joint venture company that is building a large organic dried milk powder plant at Geelong in Victoria.
Wattle Health's executive chairman, Lazarus Karasavvidis, said on Monday the Blend and Pack deal meant Wattle would be in a unique position of being the only Australian vertically integrated organic nutritional dairy company, with the ability to add value along every part of the supply chain, from the farm gate to the consumer.
"As an accredited manufacturer under China's Certification and Accreditation Administration, Blend and Pack is crucial to WHA securing a critical distribution channel into a market where a burgeoning middle class is driving demand for clean, green, Australian nutritional dairy products," Mr Karasavvidis said.
Wattle is preparing to launch an organic brand called Uganic in April to try to restore some of its fortunes.
Wattle shares hit $2.72 in late February last year. It has raised equity through share placements and rights issues regularly since listing almost two years ago, with the debt package designed to prevent further dilution to existing shareholders.
Mr Karasavvidis said steering clear of any shareholder dilution was "very important to us".
WHA Price at posting:
99.0¢ Sentiment: Buy Disclosure: Held
