Blackmores (ASX:BKL) is doing a $117 million capital raising

Blackmores (ASX: BKL) has announced that it is going to do a capital raising of up to $117 million.

What is Blackmores?

Blackmores describes itself as Australia’s leading natural health company. Maurice Blackmore founded the company in the 1930s. Blackmores has a number of different brands, not just the well-recognised Blackmores brand. It operates BioCeuticals, the Blackmores Institute, Fusion Health & Oriental Botanicals, Impromy, IsoWhey and Pure Animal Wellbeing (PAW).

Blackmores’ capital raising

Blackmores has announced that it’s looking to do a fully underwritten $92 million institutional placement and a non-underwritten share purchase plan of up to $25 million.

The capital raising share price for Blackmores will be $72.50, which is an 8.1% discount to the last closing price yesterday.

Regular shareholders will be able to apply for up to $30,000 for either the placement price, a 2.5% discount to the 5-day average price up to the closing date, or a 2.5% discount to the closing price on the closing date.

Mr Marcus Blackmore, who owns a large amount of Blackmores shares, won’t be taking part in the capital raising.

Why is Blackmores doing the capital raising?

Blackmores said the money will be used for three purposes. The first is to accelerate growth in Asia, including an FY21 entry into India. The second is an investment in an efficiency program. The third reason is to provide balance sheet strength. It will bring down the (pro forma) net leverage ratio to 0.7x with (pro forma) liqudity of $236 million.

The company said that whilst COVID-19 is causing increased demand for immunity products, non-immunity products are suffering. Access to some overseas materials is constrained.

Underlying FY20 net profit is anticipated to be $17 million to $21 million, in line with previous guidance, as a result of various higher costs and impacts. At the moment the company is potentially going to sell surplus land and non-core brands.

The capital raising is at a material discount to the share price, so shareholders may consider taking part. But I’m personally not sure about Blackmores’ prospects. For Asian growth I’d rather buy Bubs (ASX: BUB).

Disclosure: At the time of writing, Jaz doesn’t own shares in any of the businesses mentioned. 

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