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Blackmores share price: implications of the planned $117m equity raise

As Blackmores taps the market for fresh capital, we examine the key implications of the proposed raise.

ASX-listed health supplements company Blackmores Limited (BKL) today announced the details behind a $100 million plus equity raise.

All up, the company revealed that it is looking to raise $117 million: made up of $92 million fully-underwritten institutional placement; and a $25 million non-underwritten share purchase plan (SPP), available to eligible shareholders.

Centrally, these freshly issued placement shares would be issued at a fixed price of $72.50 per share, representing a modest discount to Blackmores last-traded price of $78.85.

On the institutional side of the raise, Blackmores intends to issue 1.3 million new shares, with the placement being led by Goldman Sachs. For reference, the company currently has 17.41 million shares outstanding.

Secondly, looking at the specifics behind the SPP, the company noted that the amount raised by the purchase plan will be subject to applicant demand, with the company further saying that it may scale back the offering at its discretion.

Unlike the fixed issue price of the placement, the company specified the issue price of the SPP will be the:

‘Lower of the Placement Price; and a 2.5% discount to the 5-day volume-weighted average price of Blackmores’ shares up to, and including, the closing date of the SPP (currently expected to be Friday, 3 July 2020); and a 2.5% discount to the closing price of Blackmores’ share on the closing date.’

Blackmores share price: implications of the raise

Overall, the company said it would use $40 million of the funds from the institutional side of the placement to accelerate growth in Asia and invest in an efficiency program.

‘China remains a key focus for Blackmores. The Company will invest to expand its organisational capabilities, drive innovation in a new “Modern Parenting” product line and explore opportunities for local partnerships,' Blackmores said.

The other $50 million from the institutional placement will be used to shore up Blackmores' balance sheet, with the company expecting to have $236 million in pro forma liquidity available, post-raise.

Finally, speaking of the purpose behind the equity raise, the Blackmores CEO, Alastair Symington, said:

‘It will enable us to accelerate our growth initiatives in Asia and invest in our efficiency program which will help us to achieve our objective of returning Blackmores to sustainable, profitable growth.’

Blackmores noted that its previously guided FY20 earnings guidance of between $17 million to $21 million remains unchanged.

How to trade Blackmores

Are you bullish or bearish on Blackmores? Trade accordingly. You can use CFDs to trade Blackmores and other ASX-listed stocks – LONG or SHORT through IG’s world-class trading platform now.

For example, to buy (long) or sell (short) Blackmores, follow these easy steps:

  1. Create an IG Trading Account or log in to your existing account
  2. Enter ‘Blackmores’ in the search bar and select it
  3. Choose your position size
  4. Click on ‘buy’ or ‘sell’ in the deal ticket
  5. Confirm the trade

This information has been prepared by IG, a trading name of IG Australia Pty Ltd. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.

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