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Omnia prices its rights issue
Omnia prices its rights issue
Published Date: 2019-08-13 | Source: Stephen Gunnion | Author: Stephen Gunnion
Shareholders who do not take up the deeply discounted rights shares face dilution.
Omnia has priced the terms of its controversial rights issue with the backing of a number of key institutional shareholders.
The chemicals, fertiliser and explosives group will issue 100-million new shares at R20 each to raise the R2 billion it needs to shore up its balance sheet. With a market capitalisation of just over R2.3 billion, the rights issue will be dilutionary for shareholders who don't follow their rights and take up the additional shares.
The R20 rights price is a 41% discount to Thursday's closing price of R34.07 and 62% below the level it traded at before it's 30 May statement informing the market that it planned to raise capital from shareholders.
On 23 April, the group said it was in talks with lenders to restructure its debt and wouldn't need a recapitalisation. Just over a month later, following a collaborative process with its main creditors to restructure its debt book and ensure its long-term sustainability, it backtracked and said it was planning the rights issue.
A rights issue gives existing shareholders the right but not the obligation to buy new shares, usually at a discount to the prevailing trading price. The dilution occurs because it spreads the company's profit over a larger number of shares, decreasing its earnings per share.
The group reported an after-tax loss of R407 million for the year to end-March, down from a profit of R664 million a year earlier, as all three of its main divisions turned in weaker earnings, debt rose and it faced a number of impairment and restructuring charges. Net interest-bearing borrowings jumped 73% to R4.4 million from R2.54 billion due to debt funding of working capital and March's commissioning of its nitrophosphate plant at Sasolburg, which was also financed with debt. Net finance expenses rose 62% to R438 million.
Omnia said asset managers including Allan Gray, Coronation Asset Management, Foord Asset Management, Kagiso Asset Management, Old Mutual Investment Group and Prudential Investment Managers had agreed to underwrite the rights issue, absorbing any shares that aren't taken up by other shareholders to guarantee Omnia reaches its R2 billion target.
With the conclusion of the shareholder underwriting agreement, Omnia said a standby agreement entered into with Absa Investec, Rand Merchant Bank and Standard Bank was no longer required and had been terminated.
Its shares fell 1.5% to R33.57 yesterday.
Omnia rights offer will be at R20 for a total of R2bn. Problem is, current market cap is only R2.3bn. There will be massive dilution. Shareholders will be forced to take up their rights or be diluted out of existence.-- Karin Richards (@Richards_Karin) August 12, 2019