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Bega launches $350m IPO

The company behind Australia's top-selling cheese brand yesterday talked up the dairy industry's prospects after a volatile three years as it lodged the prospectus for its $350 million float.

Bega Cheese's 150 farmer shareholders approved the float plans at a meeting in April, paving the way for the 112-year-old former co- operative to become the second dairy processor to list on the sharemarket, after Warrnambool Cheese & Butter Factory Co.

In a prospectus filed with the corporate regulator, Bega said it hoped to raise $35 million through the issue of 17.5 million shares - about 15 per cent of the company - at $2 apiece, capitalising the company at $254.1 million.

The listed company will carry $94.6 million in net debt, taking its enterprise value to $348.7 million.

Bega also plans to issue up to 850,000 free shares to staff under an employee loyalty offer.

Although the size of the offering is smaller than initially expected, the float is shaping up as one of the biggest this year as market volatility and the slump in consumer confidence lead other companies to shelve their IPO plans.

In a letter to prospective shareholders, an upbeat Bega executive chairman Barry Irvin talked up the company's "unique" business model and positive outlook for the dairy sector amid increased prices and strong overseas demand, saying the IPO would leave the company well placed to participate in "industry rationalisation which is expected to be part of future growth".

Mr Irvin, who will be joined at the helm by former Fonterra executive Aidan Coleman as chief executive, hopes investors will be attracted to Bega's position as the number one cheese brand in the country when the company's offer opens on July 26. Bega cheese holds about 11.5 per cent of the market.

The company's annual report shows it posted a $23.6 million net profit on full-year revenue of $829 million in 2009-10, while December-half revenue rose 30 per cent to $511.5 million and underlying profit rose 33 per cent to $13 million.

According to its prospectus, Bega expects to post revenues of $942 million for 2010-11 and earnings before interest, tax, depreciation and amortisation of $46.6 million.

The offer is scheduled to close on August 16, with Bega Cheese shares expected to begin trading on August 29.

The company has been advised by Kidder Williams. Commonwealth Bank is lead manager with Austock Securities as co-manager.